Correlation Between Richardson Electronics and CENTURIA OFFICE

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

By analyzing existing cross correlation between Richardson Electronics and CENTURIA OFFICE REIT, you can compare the effects of market volatilities on Richardson Electronics and CENTURIA OFFICE 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 CENTURIA OFFICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Richardson Electronics and CENTURIA OFFICE.

Diversification Opportunities for Richardson Electronics and CENTURIA OFFICE

-0.62

Correlation Coefficient

Richardson Electronics  CENTURIA OFFICE

Excellent diversification

The 3 months correlation between Richardson and CENTURIA is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and CENTURIA OFFICE REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CENTURIA OFFICE REIT 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 CENTURIA OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CENTURIA OFFICE REIT has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and CENTURIA OFFICE go up and down completely randomly.

Pair Corralation between Richardson Electronics and CENTURIA OFFICE

Assuming the 90 days horizon Richardson Electronics is expected to generate 1.72 times more return on investment than CENTURIA OFFICE. However, Richardson Electronics is 1.72 times more volatile than CENTURIA OFFICE REIT. It trades about 0.13 of its potential returns per unit of risk. CENTURIA OFFICE REIT is currently generating about -0.08 per unit of risk. If you would invest  1,057  in Richardson Electronics on September 23, 2024 and sell it today you would earn a total of  241.00  from holding Richardson Electronics or generate 22.8% return on investment over 90 days.

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

Richardson Electronics  vs.  CENTURIA OFFICE REIT

Richardson Electronics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Richardson Electronics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Richardson Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

CENTURIA OFFICE REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CENTURIA OFFICE REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Richardson Electronics and CENTURIA OFFICE

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

The idea behind Richardson Electronics and CENTURIA OFFICE REIT 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 Transaction History module to view history of all your transactions and understand their impact on performance.