Correlation Between Benchmark Electronics and Richardson Electronics

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

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

Diversification Opportunities for Benchmark Electronics and Richardson Electronics

0.59

Correlation Coefficient

Benchmark Electronics  Richardson Electronics

Very weak diversification

The 3 months correlation between Benchmark and Richardson is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics and Benchmark Electronics 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 Benchmark Electronics are associated (or correlated) with Richardson Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richardson Electronics has no effect on the direction of Benchmark Electronics i.e., Benchmark Electronics and Richardson Electronics go up and down completely randomly.

Pair Corralation between Benchmark Electronics and Richardson Electronics

Assuming the 90 days horizon Benchmark Electronics is expected to under-perform the Richardson Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Benchmark Electronics is 1.21 times less risky than Richardson Electronics. The stock trades about -0.14 of its potential returns per unit of risk. The Richardson Electronics is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,362  in Richardson Electronics on December 1, 2024 and sell it today you would lose (112.00) from holding Richardson Electronics or give up 8.22% of portfolio value over 90 days.

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

Benchmark Electronics  vs.  Richardson Electronics

Benchmark Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Benchmark Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Richardson Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Richardson Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic 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 Benchmark Electronics and Richardson Electronics

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

The idea behind Benchmark Electronics and Richardson Electronics 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .