Correlation Between Richardson Electronics and Collins Foods

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

By analyzing existing cross correlation between Richardson Electronics and Collins Foods Limited, you can compare the effects of market volatilities on Richardson Electronics and Collins Foods 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 Collins Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Richardson Electronics and Collins Foods.

Diversification Opportunities for Richardson Electronics and Collins Foods

-0.53

Correlation Coefficient

Richardson Electronics  Collins Foods

Excellent diversification

The 3 months correlation between Richardson and Collins is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and Collins Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods Limited 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 Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods Limited has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and Collins Foods go up and down completely randomly.

Pair Corralation between Richardson Electronics and Collins Foods

Assuming the 90 days horizon Richardson Electronics is expected to under-perform the Collins Foods. In addition to that, Richardson Electronics is 1.04 times more volatile than Collins Foods Limited. It trades about -0.12 of its total potential returns per unit of risk. Collins Foods Limited is currently generating about 0.1 per unit of volatility. If you would invest  436.00  in Collins Foods Limited on December 25, 2024 and sell it today you would earn a total of  54.00  from holding Collins Foods Limited or generate 12.39% return on investment over 90 days.

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

Richardson Electronics  vs.  Collins Foods Limited

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 uncertain 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.

Collins Foods Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Collins Foods Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Collins Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Richardson Electronics and Collins Foods

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

The idea behind Richardson Electronics and Collins Foods Limited 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.