Correlation Between Longfor Group and Richardson Electronics

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

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

Diversification Opportunities for Longfor Group and Richardson Electronics

-0.42

Correlation Coefficient

Longfor Group  Richardson Electronics

Very good diversification

The 3 months correlation between Longfor and Richardson is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Longfor Group Holdings and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics and Longfor Group 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 Longfor Group Holdings 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 Longfor Group i.e., Longfor Group and Richardson Electronics go up and down completely randomly.

Pair Corralation between Longfor Group and Richardson Electronics

Assuming the 90 days horizon Longfor Group Holdings is expected to generate 1.43 times more return on investment than Richardson Electronics. However, Longfor Group is 1.43 times more volatile than Richardson Electronics. It trades about 0.04 of its potential returns per unit of risk. Richardson Electronics is currently generating about -0.09 per unit of risk. If you would invest  119.00  in Longfor Group Holdings on December 22, 2024 and sell it today you would earn a total of  5.00  from holding Longfor Group Holdings or generate 4.2% return on investment over 90 days.

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

Longfor Group Holdings  vs.  Richardson Electronics

Longfor Group Holdings

Risk-Adjusted Performance

Weak

Over the last 90 days Longfor Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Longfor Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 uncertain 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.

Pair Trading with Longfor Group and Richardson Electronics

The main advantage of trading using opposite Longfor Group and Richardson Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Longfor Group 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 Longfor Group Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.