Correlation Between Sellas Life and RBC Bearings

Can any of the company-specific risk be diversified away by investing in both Sellas Life and RBC Bearings 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 Sellas Life and RBC Bearings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sellas Life Sciences and RBC Bearings Incorporated, you can compare the effects of market volatilities on Sellas Life and RBC Bearings 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 Sellas Life with a short position of RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sellas Life and RBC Bearings.

Diversification Opportunities for Sellas Life and RBC Bearings

-0.07

Correlation Coefficient

Sellas Life  RBC Bearings

Good diversification

The 3 months correlation between Sellas and RBC is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sellas Life Sciences and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings and Sellas Life 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 Sellas Life Sciences are associated (or correlated) with RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of Sellas Life i.e., Sellas Life and RBC Bearings go up and down completely randomly.

Pair Corralation between Sellas Life and RBC Bearings

Considering the 90-day investment horizon Sellas Life Sciences is expected to under-perform the RBC Bearings. In addition to that, Sellas Life is 1.86 times more volatile than RBC Bearings Incorporated. It trades about -0.04 of its total potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.15 per unit of volatility. If you would invest  28,883  in RBC Bearings Incorporated on September 3, 2024 and sell it today you would earn a total of  4,628  from holding RBC Bearings Incorporated or generate 16.02% return on investment over 90 days.

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

Sellas Life Sciences  vs.  RBC Bearings Incorporated

Sellas Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sellas Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

RBC Bearings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, RBC Bearings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sellas Life and RBC Bearings

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

The idea behind Sellas Life Sciences and RBC Bearings Incorporated 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.