Correlation Between RBC Bearings and PHILIP

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

Diversification Opportunities for RBC Bearings and PHILIP

-0.08

Correlation Coefficient

RBC Bearings  PHILIP

Good diversification

The 3 months correlation between RBC and PHILIP is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding RBC Bearings Incorporated and PHILIP MORRIS INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHILIP MORRIS INTL 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 PHILIP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHILIP MORRIS INTL has no effect on the direction of RBC Bearings i.e., RBC Bearings and PHILIP go up and down completely randomly.

Pair Corralation between RBC Bearings and PHILIP

Considering the 90-day investment horizon RBC Bearings Incorporated is expected to generate 1.65 times more return on investment than PHILIP. However, RBC Bearings is 1.65 times more volatile than PHILIP MORRIS INTL. It trades about 0.06 of its potential returns per unit of risk. PHILIP MORRIS INTL is currently generating about 0.03 per unit of risk. If you would invest  26,798  in RBC Bearings Incorporated on September 29, 2024 and sell it today you would earn a total of  3,221  from holding RBC Bearings Incorporated or generate 12.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

RBC Bearings Incorporated  vs.  PHILIP MORRIS INTL

RBC Bearings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RBC Bearings Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, RBC Bearings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

PHILIP MORRIS INTL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PHILIP MORRIS INTL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PHILIP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RBC Bearings and PHILIP

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

The idea behind RBC Bearings Incorporated and PHILIP MORRIS INTL 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.