Correlation Between CTS and Richardson Electronics
Can any of the company-specific risk be diversified away by investing in both CTS 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 CTS and Richardson Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CTS Corporation and Richardson Electronics, you can compare the effects of market volatilities on CTS 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 CTS with a short position of Richardson Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTS and Richardson Electronics.
Diversification Opportunities for CTS and Richardson Electronics
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CTS and Richardson is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CTS Corp. and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics and CTS 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 CTS Corporation 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 CTS i.e., CTS and Richardson Electronics go up and down completely randomly.
Pair Corralation between CTS and Richardson Electronics
Considering the 90-day investment horizon CTS Corporation is expected to generate 0.39 times more return on investment than Richardson Electronics. However, CTS Corporation is 2.55 times less risky than Richardson Electronics. It trades about -0.09 of its potential returns per unit of risk. Richardson Electronics is currently generating about -0.09 per unit of risk. If you would invest 5,248 in CTS Corporation on November 4, 2024 and sell it today you would lose (139.00) from holding CTS Corporation or give up 2.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTS Corp. vs. Richardson Electronics
Performance |
| Timeline |
| CTS Corporation |
| Richardson Electronics |
CTS and Richardson Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTS and Richardson Electronics
The main advantage of trading using opposite CTS and Richardson Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTS 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 CTS Corporation 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.| Richardson Electronics vs. Bel Fuse A | Richardson Electronics vs. LSI Industries | Richardson Electronics vs. Benchmark Electronics | Richardson Electronics vs. Plexus Corp |
Check out your portfolio center.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |