Correlation Between Richelieu Hardware and Baylin Technologies

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

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

Diversification Opportunities for Richelieu Hardware and Baylin Technologies

0.59

Correlation Coefficient

Richelieu Hardware  Baylin Technologies

Very weak diversification

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

Pair Corralation between Richelieu Hardware and Baylin Technologies

Assuming the 90 days trading horizon Richelieu Hardware is expected to generate 0.32 times more return on investment than Baylin Technologies. However, Richelieu Hardware is 3.11 times less risky than Baylin Technologies. It trades about -0.12 of its potential returns per unit of risk. Baylin Technologies is currently generating about -0.1 per unit of risk. If you would invest  3,888  in Richelieu Hardware on December 24, 2024 and sell it today you would lose (490.00) from holding Richelieu Hardware or give up 12.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Richelieu Hardware  vs.  Baylin Technologies

Richelieu Hardware

Risk-Adjusted Performance

Very Weak

Over the last 90 days Richelieu Hardware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Baylin Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baylin Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Richelieu Hardware and Baylin Technologies

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

The idea behind Richelieu Hardware and Baylin Technologies 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.