Correlation Between EMagin and Richardson Electronics

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

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

Diversification Opportunities for EMagin and Richardson Electronics

0.62

Correlation Coefficient

EMagin  Richardson Electronics

Poor diversification

The 3 months correlation between EMagin and Richardson is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding EMagin and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics and EMagin 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 EMagin 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 EMagin i.e., EMagin and Richardson Electronics go up and down completely randomly.

Pair Corralation between EMagin and Richardson Electronics

If you would invest  1,375  in Richardson Electronics on September 17, 2024 and sell it today you would earn a total of  41.00  from holding Richardson Electronics or generate 2.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	5.0%
Values	Daily Returns

EMagin  vs.  Richardson Electronics

EMagin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMagin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, EMagin is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Richardson Electronics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Richardson Electronics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Richardson Electronics disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EMagin and Richardson Electronics

The main advantage of trading using opposite EMagin and Richardson Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMagin 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 EMagin 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.