Correlation Between RBC Bearings and Tyson Foods

Can any of the company-specific risk be diversified away by investing in both RBC Bearings and Tyson Foods 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 Tyson Foods 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 Tyson Foods, you can compare the effects of market volatilities on RBC Bearings and Tyson Foods 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 Tyson Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of RBC Bearings and Tyson Foods.

Diversification Opportunities for RBC Bearings and Tyson Foods

-0.17

Correlation Coefficient

RBC Bearings  Tyson Foods

Good diversification

The 3 months correlation between RBC and Tyson is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods 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 Tyson Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tyson Foods has no effect on the direction of RBC Bearings i.e., RBC Bearings and Tyson Foods go up and down completely randomly.

Pair Corralation between RBC Bearings and Tyson Foods

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 1.43 times more return on investment than Tyson Foods. However, RBC Bearings is 1.43 times more volatile than Tyson Foods. It trades about 0.38 of its potential returns per unit of risk. Tyson Foods is currently generating about -0.06 per unit of risk. If you would invest  24,679  in RBC Bearings Incorporated on February 28, 2024 and sell it today you would earn a total of  4,473  from holding RBC Bearings Incorporated or generate 18.12% return on investment over 90 days.

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

RBC Bearings Incorporated  vs.  Tyson Foods

RBC Bearings

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, RBC Bearings is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Tyson Foods

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Tyson Foods may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with RBC Bearings and Tyson Foods

The main advantage of trading using opposite RBC Bearings and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RBC Bearings position performs unexpectedly, Tyson Foods 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 Tyson Foods will offset losses from the drop in Tyson Foods' long position.

The idea behind RBC Bearings Incorporated and Tyson Foods 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.