Correlation Between Richardson Electronics and LSI Industries

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

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

Diversification Opportunities for Richardson Electronics and LSI Industries

0.41

Correlation Coefficient

Richardson Electronics  LSI Industries

Very weak diversification

The 3 months correlation between Richardson and LSI is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and LSI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LSI Industries 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 LSI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LSI Industries has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and LSI Industries go up and down completely randomly.

Pair Corralation between Richardson Electronics and LSI Industries

Given the investment horizon of 90 days Richardson Electronics is expected to under-perform the LSI Industries. But the stock apears to be less risky and, when comparing its historical volatility, Richardson Electronics is 1.62 times less risky than LSI Industries. The stock trades about -0.12 of its potential returns per unit of risk. The LSI Industries is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,935  in LSI Industries on December 29, 2024 and sell it today you would lose (177.00) from holding LSI Industries or give up 9.15% of portfolio value over 90 days.

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

Richardson Electronics  vs.  LSI Industries

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.

LSI Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days LSI Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, LSI Industries is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Richardson Electronics and LSI Industries

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

The idea behind Richardson Electronics and LSI Industries 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 Stocks Directory module to find actively traded stocks across global markets.