Correlation Between National Vision and RBC Bearings

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

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

Diversification Opportunities for National Vision and RBC Bearings

0.79

Correlation Coefficient

National Vision  RBC Bearings

Poor diversification

The 3 months correlation between National and RBC is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and National Vision 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 National Vision Holdings 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 National Vision i.e., National Vision and RBC Bearings go up and down completely randomly.

Pair Corralation between National Vision and RBC Bearings

Considering the 90-day investment horizon National Vision Holdings is expected to generate 1.43 times more return on investment than RBC Bearings. However, National Vision is 1.43 times more volatile than RBC Bearings Incorporated. It trades about 0.11 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.15 per unit of risk. If you would invest  1,038  in National Vision Holdings on September 12, 2024 and sell it today you would earn a total of  167.00  from holding National Vision Holdings or generate 16.09% return on investment over 90 days.

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

National Vision Holdings  vs.  RBC Bearings Incorporated

National Vision Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, National Vision exhibited solid returns over the last few months and may actually be approaching a breakup point.

RBC Bearings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, RBC Bearings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Vision and RBC Bearings

The main advantage of trading using opposite National Vision and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Vision 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 National Vision Holdings 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.