Correlation Between Viavi Solutions and Richardson Electronics

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

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

Diversification Opportunities for Viavi Solutions and Richardson Electronics

0.77

Correlation Coefficient

Viavi Solutions  Richardson Electronics

Poor diversification

The 3 months correlation between Viavi and Richardson is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Viavi Solutions and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics and Viavi Solutions 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 Viavi Solutions 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 Viavi Solutions i.e., Viavi Solutions and Richardson Electronics go up and down completely randomly.

Pair Corralation between Viavi Solutions and Richardson Electronics

Given the investment horizon of 90 days Viavi Solutions is expected to generate 0.79 times more return on investment than Richardson Electronics. However, Viavi Solutions is 1.26 times less risky than Richardson Electronics. It trades about -0.1 of its potential returns per unit of risk. Richardson Electronics is currently generating about -0.16 per unit of risk. If you would invest  1,094  in Viavi Solutions on March 3, 2025 and sell it today you would lose (183.00) from holding Viavi Solutions or give up 16.73% of portfolio value over 90 days.

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

Viavi Solutions  vs.  Richardson Electronics

Viavi Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Viavi Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in July 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Richardson Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Richardson Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in July 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Viavi Solutions and Richardson Electronics

The main advantage of trading using opposite Viavi Solutions and Richardson Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Viavi Solutions 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 Viavi Solutions 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.