Correlation Between Boeing and RBC Bearings

Can any of the company-specific risk be diversified away by investing in both Boeing and RBC Bearings 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 Boeing and RBC Bearings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Boeing and RBC Bearings Incorporated, you can compare the effects of market volatilities on Boeing and RBC Bearings 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 Boeing with a short position of RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and RBC Bearings.

Diversification Opportunities for Boeing and RBC Bearings

-0.32

Correlation Coefficient

Boeing  RBC Bearings

Very good diversification

The 3 months correlation between Boeing and RBC is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and Boeing 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 The Boeing are associated (or correlated) with RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of Boeing i.e., Boeing and RBC Bearings go up and down completely randomly.

Pair Corralation between Boeing and RBC Bearings

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the RBC Bearings. In addition to that, Boeing is 1.13 times more volatile than RBC Bearings Incorporated. It trades about -0.01 of its total potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.04 per unit of volatility. If you would invest  23,497  in RBC Bearings Incorporated on August 19, 2024 and sell it today you would earn a total of  7,851  from holding RBC Bearings Incorporated or generate 33.41% return on investment over 90 days.

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

The Boeing  vs.  RBC Bearings Incorporated

Boeing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

RBC Bearings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, RBC Bearings may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Boeing and RBC Bearings

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

The idea behind The Boeing and RBC Bearings Incorporated 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.