Correlation Between RBC Bearings and Independence Realty

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

Diversification Opportunities for RBC Bearings and Independence Realty

0.87

Correlation Coefficient

RBC Bearings  Independence Realty

Very poor diversification

The 3 months correlation between RBC and Independence is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Independence Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independence Realty Trust 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 Independence Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independence Realty Trust has no effect on the direction of RBC Bearings i.e., RBC Bearings and Independence Realty go up and down completely randomly.

Pair Corralation between RBC Bearings and Independence Realty

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 1.26 times more return on investment than Independence Realty. However, RBC Bearings is 1.26 times more volatile than Independence Realty Trust. It trades about 0.1 of its potential returns per unit of risk. Independence Realty Trust is currently generating about 0.12 per unit of risk. If you would invest  27,314  in RBC Bearings Incorporated on September 15, 2024 and sell it today you would earn a total of  5,444  from holding RBC Bearings Incorporated or generate 19.93% 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.  Independence Realty Trust

RBC Bearings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 10 (%) 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.

Independence Realty Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Independence Realty Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Independence Realty is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with RBC Bearings and Independence Realty

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

The idea behind RBC Bearings Incorporated and Independence Realty Trust 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 Stocks Directory module to find actively traded stocks across global markets.