Correlation Between Orion Energy and Richardson Electronics

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

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

Diversification Opportunities for Orion Energy and Richardson Electronics

0.29

Correlation Coefficient

Orion Energy  Richardson Electronics

Modest diversification

The 3 months correlation between Orion and Richardson is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Orion Energy Systems and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics and Orion Energy 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 Orion Energy Systems 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 Orion Energy i.e., Orion Energy and Richardson Electronics go up and down completely randomly.

Pair Corralation between Orion Energy and Richardson Electronics

Given the investment horizon of 90 days Orion Energy Systems is expected to under-perform the Richardson Electronics. In addition to that, Orion Energy is 1.33 times more volatile than Richardson Electronics. It trades about -0.02 of its total potential returns per unit of risk. Richardson Electronics is currently generating about 0.1 per unit of volatility. If you would invest  1,375  in Richardson Electronics on September 17, 2024 and sell it today you would earn a total of  41.00  from holding Richardson Electronics or generate 2.98% return on investment over 90 days.

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

Orion Energy Systems  vs.  Richardson Electronics

Orion Energy Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orion Energy Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Orion Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Richardson Electronics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Richardson Electronics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Richardson Electronics disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orion Energy and Richardson Electronics

The main advantage of trading using opposite Orion Energy and Richardson Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orion Energy 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 Orion Energy Systems 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.