Correlation Between Regal Beloit and SMC Corp

Can any of the company-specific risk be diversified away by investing in both Regal Beloit and SMC Corp 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 Regal Beloit and SMC Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Regal Beloit and SMC Corp, you can compare the effects of market volatilities on Regal Beloit and SMC Corp 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 Regal Beloit with a short position of SMC Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regal Beloit and SMC Corp.

Diversification Opportunities for Regal Beloit and SMC Corp

0.42

Correlation Coefficient

Regal Beloit  SMC Corp

Very weak diversification

The 3 months correlation between Regal and SMC is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Regal Beloit and SMC Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Corp and Regal Beloit 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 Regal Beloit are associated (or correlated) with SMC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Corp has no effect on the direction of Regal Beloit i.e., Regal Beloit and SMC Corp go up and down completely randomly.

Pair Corralation between Regal Beloit and SMC Corp

Considering the 90-day investment horizon Regal Beloit is expected to generate 1.19 times more return on investment than SMC Corp. However, Regal Beloit is 1.19 times more volatile than SMC Corp. It trades about -0.02 of its potential returns per unit of risk. SMC Corp is currently generating about -0.1 per unit of risk. If you would invest  16,588  in Regal Beloit on September 28, 2024 and sell it today you would lose (644.00) from holding Regal Beloit or give up 3.88% of portfolio value over 90 days.

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

Regal Beloit  vs.  SMC Corp

Regal Beloit

Risk-Adjusted Performance

0 of 100

Very Weak

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

SMC Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMC Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Regal Beloit and SMC Corp

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

The idea behind Regal Beloit and SMC Corp 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 Correlations module to find global opportunities by holding instruments from different markets.