Correlation Between RBC Bearings and SPI Energy

Can any of the company-specific risk be diversified away by investing in both RBC Bearings and SPI Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining RBC Bearings and SPI Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RBC Bearings Incorporated and SPI Energy Co, you can compare the effects of market volatilities on RBC Bearings and SPI Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in RBC Bearings with a short position of SPI Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and SPI Energy.

Diversification Opportunities for RBC Bearings and SPI Energy

0.76

Correlation Coefficient

RBC Bearings  SPI Energy

Poor diversification

The 3 months correlation between RBC and SPI is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and SPI Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPI Energy and RBC Bearings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on RBC Bearings Incorporated are associated (or correlated) with SPI Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPI Energy has no effect on the direction of RBC Bearings i.e., RBC Bearings and SPI Energy go up and down completely randomly.

Pair Corralation between RBC Bearings and SPI Energy

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 0.31 times more return on investment than SPI Energy. However, RBC Bearings Incorporated is 3.18 times less risky than SPI Energy. It trades about -0.19 of its potential returns per unit of risk. SPI Energy Co is currently generating about -0.07 per unit of risk. If you would invest  27,069  in RBC Bearings Incorporated on January 24, 2024 and sell it today you would lose (2,637) from holding RBC Bearings Incorporated or give up 9.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

RBC Bearings Incorporated  vs.  SPI Energy Co

RBC Bearings rporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RBC Bearings Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

SPI Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPI Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with RBC Bearings and SPI Energy

The main advantage of trading using opposite RBC Bearings and SPI Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, SPI Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SPI Energy will offset losses from the drop in SPI Energy's long position.

The idea behind RBC Bearings Incorporated and SPI Energy Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.