Correlation Between WINMARK and Richardson Electronics
Can any of the company-specific risk be diversified away by investing in both WINMARK 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 WINMARK and Richardson Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WINMARK and Richardson Electronics, you can compare the effects of market volatilities on WINMARK 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 WINMARK with a short position of Richardson Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of WINMARK and Richardson Electronics.
Diversification Opportunities for WINMARK and Richardson Electronics
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WINMARK and Richardson is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding WINMARK and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics and WINMARK 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 WINMARK 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 WINMARK i.e., WINMARK and Richardson Electronics go up and down completely randomly.
Pair Corralation between WINMARK and Richardson Electronics
Assuming the 90 days trading horizon WINMARK is expected to generate 1.39 times less return on investment than Richardson Electronics. But when comparing it to its historical volatility, WINMARK is 1.24 times less risky than Richardson Electronics. It trades about 0.16 of its potential returns per unit of risk. Richardson Electronics is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,025 in Richardson Electronics on September 12, 2024 and sell it today you would earn a total of 323.00 from holding Richardson Electronics or generate 31.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.46% |
| Values | Daily Returns |
WINMARK vs. Richardson Electronics
Performance |
| Timeline |
| WINMARK |
| Richardson Electronics |
WINMARK and Richardson Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WINMARK and Richardson Electronics
The main advantage of trading using opposite WINMARK and Richardson Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WINMARK 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.| WINMARK vs. Regions Financial | WINMARK vs. VIRG NATL BANKSH | WINMARK vs. KENEDIX OFFICE INV | WINMARK vs. CITY OFFICE REIT |
| Richardson Electronics vs. Sunny Optical Technology | Richardson Electronics vs. Hubbell Incorporated | Richardson Electronics vs. TDK Corporation | Richardson Electronics vs. Superior Plus 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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