Correlation Between OSI Systems and Richardson Electronics

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

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

Diversification Opportunities for OSI Systems and Richardson Electronics

-0.32

Correlation Coefficient

OSI Systems  Richardson Electronics

Very good diversification

The 3 months correlation between OSI and Richardson is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding OSI Systems and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics and OSI Systems 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 OSI Systems 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 OSI Systems i.e., OSI Systems and Richardson Electronics go up and down completely randomly.

Pair Corralation between OSI Systems and Richardson Electronics

Given the investment horizon of 90 days OSI Systems is expected to generate 1.23 times more return on investment than Richardson Electronics. However, OSI Systems is 1.23 times more volatile than Richardson Electronics. It trades about 0.11 of its potential returns per unit of risk. Richardson Electronics is currently generating about -0.12 per unit of risk. If you would invest  16,725  in OSI Systems on December 29, 2024 and sell it today you would earn a total of  3,186  from holding OSI Systems or generate 19.05% return on investment over 90 days.

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

OSI Systems  vs.  Richardson Electronics

OSI Systems

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OSI Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, OSI Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with OSI Systems and Richardson Electronics

The main advantage of trading using opposite OSI Systems and Richardson Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OSI Systems 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 OSI Systems 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.