Correlation Between Research Frontiers and Richardson Electronics

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

By analyzing existing cross correlation between Research Frontiers Incorporated and Richardson Electronics, you can compare the effects of market volatilities on Research Frontiers and Richardson 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 Research Frontiers with a short position of Richardson Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Research Frontiers and Richardson Electronics.

Diversification Opportunities for Research Frontiers and Richardson Electronics

-0.16

Correlation Coefficient

Research Frontiers  Richardson Electronics

Good diversification

The 3 months correlation between Research and Richardson is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Research Frontiers Incorporate and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics and Research Frontiers 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 Research Frontiers Incorporated are associated (or correlated) with Richardson Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richardson Electronics has no effect on the direction of Research Frontiers i.e., Research Frontiers and Richardson Electronics go up and down completely randomly.

Pair Corralation between Research Frontiers and Richardson Electronics

Given the investment horizon of 90 days Research Frontiers Incorporated is expected to under-perform the Richardson Electronics. In addition to that, Research Frontiers is 1.86 times more volatile than Richardson Electronics. It trades about -0.13 of its total potential returns per unit of risk. Richardson Electronics is currently generating about 0.1 per unit of volatility. If you would invest  1,380  in Richardson Electronics on August 31, 2024 and sell it today you would earn a total of  49.00  from holding Richardson Electronics or generate 3.55% return on investment over 90 days.

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

Research Frontiers Incorporate  vs.  Richardson Electronics

Research Frontiers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Research Frontiers Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Research Frontiers is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Richardson Electronics

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Richardson Electronics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Richardson Electronics disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Research Frontiers and Richardson Electronics

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

The idea behind Research Frontiers Incorporated and Richardson Electronics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.