Correlation Between Richardson Electronics and Orion Energy

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Can any of the company-specific risk be diversified away by investing in both Richardson Electronics and Orion Energy 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 Orion Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Richardson Electronics and Orion Energy Systems, you can compare the effects of market volatilities on Richardson Electronics and Orion Energy 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 Orion Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Richardson Electronics and Orion Energy.

Diversification Opportunities for Richardson Electronics and Orion Energy

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Richardson and Orion is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Richardson Electronics and Orion Energy Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orion Energy Systems 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 Orion Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orion Energy Systems has no effect on the direction of Richardson Electronics i.e., Richardson Electronics and Orion Energy go up and down completely randomly.

Pair Corralation between Richardson Electronics and Orion Energy

Given the investment horizon of 90 days Richardson Electronics is expected to generate 0.91 times more return on investment than Orion Energy. However, Richardson Electronics is 1.1 times less risky than Orion Energy. It trades about 0.15 of its potential returns per unit of risk. Orion Energy Systems is currently generating about 0.0 per unit of risk. If you would invest  1,184  in Richardson Electronics on September 17, 2024 and sell it today you would earn a total of  232.00  from holding Richardson Electronics or generate 19.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Richardson Electronics  vs.  Orion Energy Systems

 Performance 
       Timeline  
Richardson Electronics 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
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.
Orion Energy Systems 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 and Orion Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Richardson Electronics and Orion Energy

The main advantage of trading using opposite Richardson Electronics and Orion Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Richardson Electronics position performs unexpectedly, Orion Energy 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 Orion Energy will offset losses from the drop in Orion Energy's long position.
The idea behind Richardson Electronics and Orion Energy Systems 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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