Correlation Between RBC Bearings and National Vision

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

Diversification Opportunities for RBC Bearings and National Vision

0.82

Correlation Coefficient

RBC Bearings  National Vision

Very poor diversification

The 3 months correlation between RBC and National is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and National Vision Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Vision Holdings 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 National Vision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Vision Holdings has no effect on the direction of RBC Bearings i.e., RBC Bearings and National Vision go up and down completely randomly.

Pair Corralation between RBC Bearings and National Vision

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 0.68 times more return on investment than National Vision. However, RBC Bearings Incorporated is 1.48 times less risky than National Vision. It trades about 0.16 of its potential returns per unit of risk. National Vision Holdings is currently generating about 0.08 per unit of risk. If you would invest  28,570  in RBC Bearings Incorporated on September 4, 2024 and sell it today you would earn a total of  4,953  from holding RBC Bearings Incorporated or generate 17.34% return on investment over 90 days.

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

RBC Bearings Incorporated  vs.  National Vision Holdings

RBC Bearings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 12 (%) 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.

National Vision Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, National Vision may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with RBC Bearings and National Vision

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

The idea behind RBC Bearings Incorporated and National Vision Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.