Correlation Between IDEX and Regal Beloit

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

By analyzing existing cross correlation between IDEX Corporation and Regal Beloit, you can compare the effects of market volatilities on IDEX and Regal Beloit 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 IDEX with a short position of Regal Beloit. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDEX and Regal Beloit.

Diversification Opportunities for IDEX and Regal Beloit

0.74

Correlation Coefficient

IDEX  Regal Beloit

Poor diversification

The 3 months correlation between IDEX and Regal is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. and Regal Beloit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regal Beloit and IDEX 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 IDEX Corporation are associated (or correlated) with Regal Beloit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regal Beloit has no effect on the direction of IDEX i.e., IDEX and Regal Beloit go up and down completely randomly.

Pair Corralation between IDEX and Regal Beloit

Considering the 90-day investment horizon IDEX Corporation is expected to generate 0.66 times more return on investment than Regal Beloit. However, IDEX Corporation is 1.51 times less risky than Regal Beloit. It trades about 0.14 of its potential returns per unit of risk. Regal Beloit is currently generating about 0.08 per unit of risk. If you would invest  20,222  in IDEX Corporation on September 2, 2024 and sell it today you would earn a total of  2,841  from holding IDEX Corporation or generate 14.05% return on investment over 90 days.

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

IDEX Corp.  vs.  Regal Beloit

IDEX

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IDEX Corporation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, IDEX showed solid returns over the last few months and may actually be approaching a breakup point.

Regal Beloit

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Regal Beloit are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Regal Beloit may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IDEX and Regal Beloit

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

The idea behind IDEX Corporation and Regal Beloit 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.