Correlation Between Richelieu Hardware and Lassonde Industries

Can any of the company-specific risk be diversified away by investing in both Richelieu Hardware and Lassonde Industries 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 Richelieu Hardware and Lassonde Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Richelieu Hardware and Lassonde Industries, you can compare the effects of market volatilities on Richelieu Hardware and Lassonde Industries 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 Richelieu Hardware with a short position of Lassonde Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Richelieu Hardware and Lassonde Industries.

Diversification Opportunities for Richelieu Hardware and Lassonde Industries

0.03

Correlation Coefficient

Richelieu Hardware  Lassonde Industries

Significant diversification

The 3 months correlation between Richelieu and Lassonde is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Richelieu Hardware and Lassonde Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lassonde Industries and Richelieu Hardware 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 Richelieu Hardware are associated (or correlated) with Lassonde Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lassonde Industries has no effect on the direction of Richelieu Hardware i.e., Richelieu Hardware and Lassonde Industries go up and down completely randomly.

Pair Corralation between Richelieu Hardware and Lassonde Industries

Assuming the 90 days trading horizon Richelieu Hardware is expected to generate 3.58 times less return on investment than Lassonde Industries. But when comparing it to its historical volatility, Richelieu Hardware is 1.35 times less risky than Lassonde Industries. It trades about 0.03 of its potential returns per unit of risk. Lassonde Industries is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10,186  in Lassonde Industries on August 31, 2024 and sell it today you would earn a total of  7,664  from holding Lassonde Industries or generate 75.24% return on investment over 90 days.

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

Richelieu Hardware  vs.  Lassonde Industries

Richelieu Hardware

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Richelieu Hardware are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Richelieu Hardware is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Lassonde Industries

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lassonde Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Lassonde Industries is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Richelieu Hardware and Lassonde Industries

The main advantage of trading using opposite Richelieu Hardware and Lassonde Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Richelieu Hardware position performs unexpectedly, Lassonde Industries 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 Lassonde Industries will offset losses from the drop in Lassonde Industries' long position.

The idea behind Richelieu Hardware and Lassonde Industries 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.