Correlation Between Richardson Electronics and Fuyao Glass

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

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

Diversification Opportunities for Richardson Electronics and Fuyao Glass

-0.01

Correlation Coefficient

Richardson Electronics  Fuyao Glass

Good diversification

The 3 months correlation between Richardson and Fuyao is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and Fuyao Glass Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuyao Glass Industry and Richardson Electronics 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 Richardson Electronics are associated (or correlated) with Fuyao Glass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuyao Glass Industry has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and Fuyao Glass go up and down completely randomly.

Pair Corralation between Richardson Electronics and Fuyao Glass

Assuming the 90 days horizon Richardson Electronics is expected to under-perform the Fuyao Glass. But the stock apears to be less risky and, when comparing its historical volatility, Richardson Electronics is 1.07 times less risky than Fuyao Glass. The stock trades about -0.12 of its potential returns per unit of risk. The Fuyao Glass Industry is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  650.00  in Fuyao Glass Industry on December 23, 2024 and sell it today you would lose (5.00) from holding Fuyao Glass Industry or give up 0.77% of portfolio value over 90 days.

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

Richardson Electronics  vs.  Fuyao Glass Industry

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Fuyao Glass Industry

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Richardson Electronics and Fuyao Glass

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

The idea behind Richardson Electronics and Fuyao Glass Industry 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.