Correlation Between RBC Bearings and Edgewell Personal

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

Diversification Opportunities for RBC Bearings and Edgewell Personal

0.02

Correlation Coefficient

RBC Bearings  Edgewell Personal

Significant diversification

The 3 months correlation between RBC and Edgewell is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Edgewell Personal Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewell Personal Care 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 Edgewell Personal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewell Personal Care has no effect on the direction of RBC Bearings i.e., RBC Bearings and Edgewell Personal go up and down completely randomly.

Pair Corralation between RBC Bearings and Edgewell Personal

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 1.15 times more return on investment than Edgewell Personal. However, RBC Bearings is 1.15 times more volatile than Edgewell Personal Care. It trades about 0.15 of its potential returns per unit of risk. Edgewell Personal Care is currently generating about -0.07 per unit of risk. If you would invest  28,883  in RBC Bearings Incorporated on September 2, 2024 and sell it today you would earn a total of  4,628  from holding RBC Bearings Incorporated or generate 16.02% return on investment over 90 days.

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

RBC Bearings Incorporated  vs.  Edgewell Personal Care

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 unfluctuating fundamental drivers, RBC Bearings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Edgewell Personal Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edgewell Personal Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with RBC Bearings and Edgewell Personal

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

The idea behind RBC Bearings Incorporated and Edgewell Personal Care 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.