Correlation Between Richardson Electronics and INDIKA ENERGY

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

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

Diversification Opportunities for Richardson Electronics and INDIKA ENERGY

-0.62

Correlation Coefficient

Richardson Electronics  INDIKA ENERGY

Excellent diversification

The 3 months correlation between Richardson and INDIKA is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and INDIKA ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDIKA ENERGY 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 INDIKA ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDIKA ENERGY has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and INDIKA ENERGY go up and down completely randomly.

Pair Corralation between Richardson Electronics and INDIKA ENERGY

Assuming the 90 days horizon Richardson Electronics is expected to generate 1.37 times less return on investment than INDIKA ENERGY. But when comparing it to its historical volatility, Richardson Electronics is 1.32 times less risky than INDIKA ENERGY. It trades about 0.03 of its potential returns per unit of risk. INDIKA ENERGY is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8.85  in INDIKA ENERGY on October 25, 2024 and sell it today you would earn a total of  0.25  from holding INDIKA ENERGY or generate 2.82% return on investment over 90 days.

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

Richardson Electronics  vs.  INDIKA ENERGY

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 stable basic indicators, Richardson Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

INDIKA ENERGY

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Richardson Electronics and INDIKA ENERGY

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

The idea behind Richardson Electronics and INDIKA ENERGY 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.