Correlation Between Standard Foods and Realtek Semiconductor

Can any of the company-specific risk be diversified away by investing in both Standard Foods and Realtek Semiconductor 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 Standard Foods and Realtek Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Standard Foods and Realtek Semiconductor

0.46

Correlation Coefficient

Standard Foods  Realtek Semiconductor

Very weak diversification

The 3 months correlation between Standard and Realtek is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Standard Foods Corp and Realtek Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realtek Semiconductor and Standard Foods 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 Standard Foods Corp are associated (or correlated) with Realtek Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realtek Semiconductor has no effect on the direction of Standard Foods i.e., Standard Foods and Realtek Semiconductor go up and down completely randomly.

Pair Corralation between Standard Foods and Realtek Semiconductor

Assuming the 90 days trading horizon Standard Foods Corp is expected to under-perform the Realtek Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Standard Foods Corp is 2.37 times less risky than Realtek Semiconductor. The stock trades about -0.09 of its potential returns per unit of risk. The Realtek Semiconductor Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  56,400  in Realtek Semiconductor Corp on December 30, 2024 and sell it today you would lose (1,600) from holding Realtek Semiconductor Corp or give up 2.84% of portfolio value over 90 days.

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

Standard Foods Corp  vs.  Realtek Semiconductor Corp

Standard Foods Corp

Risk-Adjusted Performance

Very Weak

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

Realtek Semiconductor

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Standard Foods and Realtek Semiconductor

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

The idea behind Standard Foods Corp and Realtek Semiconductor 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.