Correlation Between Kinetik Holdings and RBC Bearings

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

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

Diversification Opportunities for Kinetik Holdings and RBC Bearings

0.83

Correlation Coefficient

Kinetik Holdings  RBC Bearings

Very poor diversification

The 3 months correlation between Kinetik and RBC is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Kinetik 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 Kinetik Holdings 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 Kinetik 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 Kinetik Holdings i.e., Kinetik Holdings and RBC Bearings go up and down completely randomly.

Pair Corralation between Kinetik Holdings and RBC Bearings

Given the investment horizon of 90 days Kinetik Holdings is expected to generate 1.3 times more return on investment than RBC Bearings. However, Kinetik Holdings is 1.3 times more volatile than RBC Bearings Incorporated. It trades about 0.15 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.01 per unit of risk. If you would invest  4,667  in Kinetik Holdings on September 24, 2024 and sell it today you would earn a total of  1,039  from holding Kinetik Holdings or generate 22.26% return on investment over 90 days.

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

Kinetik Holdings  vs.  RBC Bearings Incorporated

Kinetik Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetik Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Kinetik Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

RBC Bearings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 1 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kinetik Holdings and RBC Bearings

The main advantage of trading using opposite Kinetik Holdings and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinetik Holdings 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 Kinetik 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.