Correlation Between Richardson Electronics and Strategic Education

Can any of the company-specific risk be diversified away by investing in both Richardson Electronics and Strategic 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 Strategic 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 Strategic Education, you can compare the effects of market volatilities on Richardson Electronics and Strategic 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 Strategic Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Richardson Electronics and Strategic Education.

Diversification Opportunities for Richardson Electronics and Strategic Education

0.76

Correlation Coefficient

Richardson Electronics  Strategic Education

Poor diversification

The 3 months correlation between Richardson and Strategic is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and Strategic Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Education 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 Strategic Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Education has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and Strategic Education go up and down completely randomly.

Pair Corralation between Richardson Electronics and Strategic Education

Assuming the 90 days horizon Richardson Electronics is expected to generate 8.69 times less return on investment than Strategic Education. In addition to that, Richardson Electronics is 1.92 times more volatile than Strategic Education. It trades about 0.0 of its total potential returns per unit of risk. Strategic Education is currently generating about 0.04 per unit of volatility. If you would invest  6,893  in Strategic Education on September 24, 2024 and sell it today you would earn a total of  2,207  from holding Strategic Education or generate 32.02% return on investment over 90 days.

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

Richardson Electronics  vs.  Strategic Education

Richardson Electronics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Richardson Electronics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Richardson Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Strategic Education

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Education are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Strategic Education may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Richardson Electronics and Strategic Education

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

The idea behind Richardson Electronics and Strategic Education 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.