Correlation Between Richardson Electronics and Benchmark Electronics
Can any of the company-specific risk be diversified away by investing in both Richardson Electronics and Benchmark 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 Richardson Electronics and Benchmark Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Richardson Electronics and Benchmark Electronics, you can compare the effects of market volatilities on Richardson Electronics and Benchmark 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 Richardson Electronics with a short position of Benchmark Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Richardson Electronics and Benchmark Electronics.
Diversification Opportunities for Richardson Electronics and Benchmark Electronics
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Richardson and Benchmark is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Electronics 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 Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and Benchmark Electronics go up and down completely randomly.
Pair Corralation between Richardson Electronics and Benchmark Electronics
Given the investment horizon of 90 days Richardson Electronics is expected to generate 3.75 times less return on investment than Benchmark Electronics. But when comparing it to its historical volatility, Richardson Electronics is 1.82 times less risky than Benchmark Electronics. It trades about 0.08 of its potential returns per unit of risk. Benchmark Electronics is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,295 in Benchmark Electronics on August 24, 2024 and sell it today you would earn a total of 470.00 from holding Benchmark Electronics or generate 10.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Richardson Electronics vs. Benchmark Electronics
Performance |
| Timeline |
| Richardson Electronics |
| Benchmark Electronics |
Richardson Electronics and Benchmark Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Richardson Electronics and Benchmark Electronics
The main advantage of trading using opposite Richardson Electronics and Benchmark Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Richardson Electronics position performs unexpectedly, Benchmark 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 Benchmark Electronics will offset losses from the drop in Benchmark Electronics' long position.| Richardson Electronics vs. Bel Fuse A | Richardson Electronics vs. LSI Industries | Richardson Electronics vs. Benchmark Electronics | Richardson Electronics vs. Plexus Corp |
| Benchmark Electronics vs. Plexus Corp | Benchmark Electronics vs. Jabil Circuit | Benchmark Electronics vs. Rogers | Benchmark Electronics vs. Sanmina |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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