Correlation Between Richelieu Hardware and Wilmington Capital

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

By analyzing existing cross correlation between Richelieu Hardware and Wilmington Capital Management, you can compare the effects of market volatilities on Richelieu Hardware and Wilmington Capital 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 Wilmington Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Richelieu Hardware and Wilmington Capital.

Diversification Opportunities for Richelieu Hardware and Wilmington Capital

0.18

Correlation Coefficient

Richelieu Hardware  Wilmington Capital

Average diversification

The 3 months correlation between Richelieu and Wilmington is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Richelieu Hardware and Wilmington Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Capital 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 Wilmington Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Capital has no effect on the direction of Richelieu Hardware i.e., Richelieu Hardware and Wilmington Capital go up and down completely randomly.

Pair Corralation between Richelieu Hardware and Wilmington Capital

Assuming the 90 days trading horizon Richelieu Hardware is expected to generate 3.31 times less return on investment than Wilmington Capital. But when comparing it to its historical volatility, Richelieu Hardware is 2.76 times less risky than Wilmington Capital. It trades about 0.02 of its potential returns per unit of risk. Wilmington Capital Management is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  226.00  in Wilmington Capital Management on October 3, 2024 and sell it today you would earn a total of  5.00  from holding Wilmington Capital Management or generate 2.21% return on investment over 90 days.

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

Richelieu Hardware  vs.  Wilmington Capital Management

Richelieu Hardware

Risk-Adjusted Performance

0 of 100

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 very healthy technical indicators, Richelieu Hardware is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Wilmington Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wilmington Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Richelieu Hardware and Wilmington Capital

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

The idea behind Richelieu Hardware and Wilmington Capital Management 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.