Correlation Between Richardson Electronics and Charter Communications

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

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

Diversification Opportunities for Richardson Electronics and Charter Communications

0.84

Correlation Coefficient

Richardson Electronics  Charter Communications

Very poor diversification

The 3 months correlation between Richardson and Charter is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications 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 Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and Charter Communications go up and down completely randomly.

Pair Corralation between Richardson Electronics and Charter Communications

Assuming the 90 days horizon Richardson Electronics is expected to generate 0.84 times more return on investment than Charter Communications. However, Richardson Electronics is 1.19 times less risky than Charter Communications. It trades about 0.18 of its potential returns per unit of risk. Charter Communications is currently generating about 0.08 per unit of risk. If you would invest  1,025  in Richardson Electronics on September 12, 2024 and sell it today you would earn a total of  323.00  from holding Richardson Electronics or generate 31.51% 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.  Charter Communications

Richardson Electronics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Richardson Electronics are ranked lower than 13 (%) 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.

Charter Communications

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Charter Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Richardson Electronics and Charter Communications

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

The idea behind Richardson Electronics and Charter Communications 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.