Correlation Between Hana Microelectronics and Richardson Electronics

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

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

Diversification Opportunities for Hana Microelectronics and Richardson Electronics

0.06

Correlation Coefficient

Hana Microelectronics  Richardson Electronics

Significant diversification

The 3 months correlation between Hana and Richardson is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hana Microelectronics Public and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics and Hana Microelectronics 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 Hana Microelectronics Public 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 Hana Microelectronics i.e., Hana Microelectronics and Richardson Electronics go up and down completely randomly.

Pair Corralation between Hana Microelectronics and Richardson Electronics

Assuming the 90 days trading horizon Hana Microelectronics Public is expected to under-perform the Richardson Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Hana Microelectronics Public is 1.7 times less risky than Richardson Electronics. The stock trades about -0.26 of its potential returns per unit of risk. The Richardson Electronics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,309  in Richardson Electronics on October 22, 2024 and sell it today you would lose (9.00) from holding Richardson Electronics or give up 0.69% of portfolio value over 90 days.

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

Hana Microelectronics Public  vs.  Richardson Electronics

Hana Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hana Microelectronics Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hana Microelectronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Richardson Electronics

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Richardson Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Richardson Electronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hana Microelectronics and Richardson Electronics

The main advantage of trading using opposite Hana Microelectronics and Richardson Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hana Microelectronics 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 Hana Microelectronics Public 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.