Correlation Between CF Industries and Vishay Intertechnology

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

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

Diversification Opportunities for CF Industries and Vishay Intertechnology

-0.27

Correlation Coefficient

CF Industries  Vishay Intertechnology

Very good diversification

The 3 months correlation between CF Industries and Vishay is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings and Vishay Intertechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vishay Intertechnology and CF 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 CF Industries Holdings are associated (or correlated) with Vishay Intertechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vishay Intertechnology has no effect on the direction of CF Industries i.e., CF Industries and Vishay Intertechnology go up and down completely randomly.

Pair Corralation between CF Industries and Vishay Intertechnology

Allowing for the 90-day total investment horizon CF Industries is expected to generate 1.0 times less return on investment than Vishay Intertechnology. But when comparing it to its historical volatility, CF Industries Holdings is 2.02 times less risky than Vishay Intertechnology. It trades about 0.26 of its potential returns per unit of risk. Vishay Intertechnology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,702  in Vishay Intertechnology on September 5, 2024 and sell it today you would earn a total of  147.00  from holding Vishay Intertechnology or generate 8.64% return on investment over 90 days.

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

CF Industries Holdings  vs.  Vishay Intertechnology

CF Industries Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CF Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Vishay Intertechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vishay Intertechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vishay Intertechnology is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CF Industries and Vishay Intertechnology

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

The idea behind CF Industries Holdings and Vishay Intertechnology 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.