Correlation Between RBC Bearings and Virgin Group

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

Diversification Opportunities for RBC Bearings and Virgin Group

0.45

Correlation Coefficient

RBC Bearings  Virgin Group

Very weak diversification

The 3 months correlation between RBC and Virgin is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Virgin Group Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Group Acquisition 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 Virgin Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Group Acquisition has no effect on the direction of RBC Bearings i.e., RBC Bearings and Virgin Group go up and down completely randomly.

Pair Corralation between RBC Bearings and Virgin Group

Considering the 90-day investment horizon RBC Bearings is expected to generate 1.1 times less return on investment than Virgin Group. But when comparing it to its historical volatility, RBC Bearings Incorporated is 2.29 times less risky than Virgin Group. It trades about 0.16 of its potential returns per unit of risk. Virgin Group Acquisition is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  134.00  in Virgin Group Acquisition on September 4, 2024 and sell it today you would earn a total of  20.00  from holding Virgin Group Acquisition or generate 14.93% return on investment over 90 days.

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

RBC Bearings Incorporated  vs.  Virgin Group Acquisition

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.

Virgin Group Acquisition

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Group Acquisition are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Virgin Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RBC Bearings and Virgin Group

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

The idea behind RBC Bearings Incorporated and Virgin Group Acquisition 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.