Correlation Between RBC Bearings and Tower One

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

Diversification Opportunities for RBC Bearings and Tower One

0.0

Correlation Coefficient

RBC Bearings  Tower One

Pay attention - limited upside

The 3 months correlation between RBC and Tower is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and Tower One Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower One Wireless 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 Tower One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower One Wireless has no effect on the direction of RBC Bearings i.e., RBC Bearings and Tower One go up and down completely randomly.

Pair Corralation between RBC Bearings and Tower One

Considering the 90-day investment horizon RBC Bearings is expected to generate 14.08 times less return on investment than Tower One. But when comparing it to its historical volatility, RBC Bearings Incorporated is 26.53 times less risky than Tower One. It trades about 0.07 of its potential returns per unit of risk. Tower One Wireless is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.33  in Tower One Wireless on September 5, 2024 and sell it today you would lose (5.32) from holding Tower One Wireless or give up 99.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

RBC Bearings Incorporated  vs.  Tower One Wireless

RBC Bearings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 14 (%) 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.

Tower One Wireless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tower One Wireless has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tower One is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with RBC Bearings and Tower One

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

The idea behind RBC Bearings Incorporated and Tower One Wireless 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 Valuation module to check real value of public entities based on technical and fundamental data.