Correlation Between RBC Bearings and BW Offshore

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

Diversification Opportunities for RBC Bearings and BW Offshore

0.51

Correlation Coefficient

RBC Bearings  BW Offshore

Very weak diversification

The 3 months correlation between RBC and BWOFY is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and BW Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore Limited 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 BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore Limited has no effect on the direction of RBC Bearings i.e., RBC Bearings and BW Offshore go up and down completely randomly.

Pair Corralation between RBC Bearings and BW Offshore

Considering the 90-day investment horizon RBC Bearings is expected to generate 12.46 times less return on investment than BW Offshore. In addition to that, RBC Bearings is 2.34 times more volatile than BW Offshore Limited. It trades about 0.01 of its total potential returns per unit of risk. BW Offshore Limited is currently generating about 0.3 per unit of volatility. If you would invest  538.00  in BW Offshore Limited on September 18, 2024 and sell it today you would earn a total of  17.00  from holding BW Offshore Limited or generate 3.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

RBC Bearings Incorporated  vs.  BW Offshore Limited

RBC Bearings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, RBC Bearings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BW Offshore Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BW Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RBC Bearings and BW Offshore

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

The idea behind RBC Bearings Incorporated and BW Offshore Limited 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.