Correlation Between Richardson Electronics and DeVry Education

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

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

Diversification Opportunities for Richardson Electronics and DeVry Education

0.81

Correlation Coefficient

Richardson Electronics  DeVry Education

Very poor diversification

The 3 months correlation between Richardson and DeVry is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and DeVry Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DeVry Education Group 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 DeVry Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DeVry Education Group has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and DeVry Education go up and down completely randomly.

Pair Corralation between Richardson Electronics and DeVry Education

Assuming the 90 days horizon Richardson Electronics is expected to under-perform the DeVry Education. In addition to that, Richardson Electronics is 1.62 times more volatile than DeVry Education Group. It trades about -0.01 of its total potential returns per unit of risk. DeVry Education Group is currently generating about 0.09 per unit of volatility. If you would invest  3,440  in DeVry Education Group on October 12, 2024 and sell it today you would earn a total of  5,560  from holding DeVry Education Group or generate 161.63% return on investment over 90 days.

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

Richardson Electronics  vs.  DeVry Education Group

Richardson Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Richardson Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Richardson Electronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DeVry Education Group

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DeVry Education Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, DeVry Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Richardson Electronics and DeVry Education

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

The idea behind Richardson Electronics and DeVry Education Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..