Correlation Between Richardson Electronics and Inrad Optics

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

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

Diversification Opportunities for Richardson Electronics and Inrad Optics

-0.53

Correlation Coefficient

Richardson Electronics  Inrad Optics

Excellent diversification

The 3 months correlation between Richardson and Inrad is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and Inrad Optics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inrad Optics 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 Inrad Optics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inrad Optics has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and Inrad Optics go up and down completely randomly.

Pair Corralation between Richardson Electronics and Inrad Optics

If you would invest  1,173  in Richardson Electronics on September 13, 2024 and sell it today you would earn a total of  271.00  from holding Richardson Electronics or generate 23.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Richardson Electronics  vs.  Inrad Optics

Richardson Electronics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Richardson Electronics are ranked lower than 13 (%) 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.

Inrad Optics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inrad Optics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Inrad Optics is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Richardson Electronics and Inrad Optics

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

The idea behind Richardson Electronics and Inrad Optics 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.