Correlation Between Vishay Intertechnology and China Communications

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

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

Diversification Opportunities for Vishay Intertechnology and China Communications

0.2

Correlation Coefficient

Vishay Intertechnology  China Communications

Modest diversification

The 3 months correlation between Vishay and China is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Vishay Intertechnology and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications and Vishay Intertechnology 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 Vishay Intertechnology are associated (or correlated) with China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Vishay Intertechnology i.e., Vishay Intertechnology and China Communications go up and down completely randomly.

Pair Corralation between Vishay Intertechnology and China Communications

Assuming the 90 days trading horizon Vishay Intertechnology is expected to under-perform the China Communications. In addition to that, Vishay Intertechnology is 1.41 times more volatile than China Communications Services. It trades about -0.2 of its total potential returns per unit of risk. China Communications Services is currently generating about 0.36 per unit of volatility. If you would invest  48.00  in China Communications Services on September 28, 2024 and sell it today you would earn a total of  5.00  from holding China Communications Services or generate 10.42% return on investment over 90 days.

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

Vishay Intertechnology  vs.  China Communications Services

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. In spite of comparatively stable basic indicators, Vishay Intertechnology is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

China Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Communications Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vishay Intertechnology and China Communications

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

The idea behind Vishay Intertechnology and China Communications Services 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.