Correlation Between Richardson Electronics and United Natural

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

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

Diversification Opportunities for Richardson Electronics and United Natural

-0.6

Correlation Coefficient

Richardson Electronics  United Natural

Excellent diversification

The 3 months correlation between Richardson and United is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and United Natural Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural Foods 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 United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and United Natural go up and down completely randomly.

Pair Corralation between Richardson Electronics and United Natural

Assuming the 90 days horizon Richardson Electronics is expected to generate 1.91 times less return on investment than United Natural. But when comparing it to its historical volatility, Richardson Electronics is 1.07 times less risky than United Natural. It trades about 0.03 of its potential returns per unit of risk. United Natural Foods is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,701  in United Natural Foods on December 2, 2024 and sell it today you would earn a total of  1,278  from holding United Natural Foods or generate 75.13% 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.  United Natural Foods

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

United Natural Foods

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, United Natural reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Richardson Electronics and United Natural

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

The idea behind Richardson Electronics and United Natural Foods 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 CEOs Directory module to screen CEOs from public companies around the world.