Correlation Between Schmitt Industries and Richardson Electronics

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

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

Diversification Opportunities for Schmitt Industries and Richardson Electronics

-0.12

Correlation Coefficient

Schmitt Industries  Richardson Electronics

Good diversification

The 3 months correlation between Schmitt and Richardson is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Schmitt Industries and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics and Schmitt Industries 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 Schmitt Industries 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 Schmitt Industries i.e., Schmitt Industries and Richardson Electronics go up and down completely randomly.

Pair Corralation between Schmitt Industries and Richardson Electronics

If you would invest  1,162  in Richardson Electronics on September 14, 2024 and sell it today you would earn a total of  244.00  from holding Richardson Electronics or generate 21.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Schmitt Industries  vs.  Richardson Electronics

Schmitt Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schmitt Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Schmitt Industries is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Richardson Electronics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Richardson Electronics are ranked lower than 12 (%) 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 Schmitt Industries and Richardson Electronics

The main advantage of trading using opposite Schmitt Industries and Richardson Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schmitt Industries 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 Schmitt Industries 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .