Correlation Between Richardson Electronics and AOI Electronics

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

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

Diversification Opportunities for Richardson Electronics and AOI Electronics

-0.38

Correlation Coefficient

Richardson Electronics  AOI Electronics

Very good diversification

The 3 months correlation between Richardson and AOI is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and AOI Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AOI Electronics 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 AOI Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AOI Electronics has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and AOI Electronics go up and down completely randomly.

Pair Corralation between Richardson Electronics and AOI Electronics

Assuming the 90 days horizon Richardson Electronics is expected to under-perform the AOI Electronics. In addition to that, Richardson Electronics is 18.91 times more volatile than AOI Electronics Co. It trades about -0.18 of its total potential returns per unit of risk. AOI Electronics Co is currently generating about 0.13 per unit of volatility. If you would invest  1,850  in AOI Electronics Co on December 30, 2024 and sell it today you would earn a total of  18.00  from holding AOI Electronics Co or generate 0.97% return on investment over 90 days.

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

Richardson Electronics  vs.  AOI Electronics Co

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.

AOI Electronics

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AOI Electronics Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AOI Electronics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Richardson Electronics and AOI Electronics

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

The idea behind Richardson Electronics and AOI Electronics Co 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.