Correlation Between Richardson Electronics and Knowles Cor

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

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

Diversification Opportunities for Richardson Electronics and Knowles Cor

0.71

Correlation Coefficient

Richardson Electronics  Knowles Cor

Poor diversification

The 3 months correlation between Richardson and Knowles is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and Knowles Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knowles Cor 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 Knowles Cor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knowles Cor has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and Knowles Cor go up and down completely randomly.

Pair Corralation between Richardson Electronics and Knowles Cor

Given the investment horizon of 90 days Richardson Electronics is expected to generate 1.68 times more return on investment than Knowles Cor. However, Richardson Electronics is 1.68 times more volatile than Knowles Cor. It trades about -0.14 of its potential returns per unit of risk. Knowles Cor is currently generating about -0.28 per unit of risk. If you would invest  1,394  in Richardson Electronics on December 29, 2024 and sell it today you would lose (297.00) from holding Richardson Electronics or give up 21.31% of portfolio value over 90 days.

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

Richardson Electronics  vs.  Knowles Cor

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 weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Knowles Cor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knowles Cor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Richardson Electronics and Knowles Cor

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

The idea behind Richardson Electronics and Knowles Cor 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.