Correlation Between Sto SE and Richardson Electronics
Can any of the company-specific risk be diversified away by investing in both Sto SE 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 Sto SE and Richardson Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sto SE Co and Richardson Electronics, you can compare the effects of market volatilities on Sto SE 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 Sto SE with a short position of Richardson Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sto SE and Richardson Electronics.
Diversification Opportunities for Sto SE and Richardson Electronics
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sto and Richardson is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sto SE Co and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics and Sto SE 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 Sto SE Co 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 Sto SE i.e., Sto SE and Richardson Electronics go up and down completely randomly.
Pair Corralation between Sto SE and Richardson Electronics
Assuming the 90 days trading horizon Sto SE Co is expected to under-perform the Richardson Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Sto SE Co is 1.41 times less risky than Richardson Electronics. The stock trades about -0.02 of its potential returns per unit of risk. The Richardson Electronics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,084 in Richardson Electronics on September 4, 2024 and sell it today you would earn a total of 232.00 from holding Richardson Electronics or generate 21.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Sto SE Co vs. Richardson Electronics
Performance |
| Timeline |
| Sto SE |
| Richardson Electronics |
Sto SE and Richardson Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sto SE and Richardson Electronics
The main advantage of trading using opposite Sto SE and Richardson Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sto SE 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.| Sto SE vs. Richardson Electronics | Sto SE vs. FUTURE GAMING GRP | Sto SE vs. Benchmark Electronics | Sto SE vs. Methode Electronics |
| Richardson Electronics vs. Hon Hai Precision | Richardson Electronics vs. Samsung SDI Co | Richardson Electronics vs. Murata Manufacturing Co | Richardson Electronics vs. Mitsubishi Electric |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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