Correlation Between Vicor and Murata Manufacturing

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

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

Diversification Opportunities for Vicor and Murata Manufacturing

-0.67

Correlation Coefficient

Vicor  Murata Manufacturing

Excellent diversification

The 3 months correlation between Vicor and Murata is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Vicor and Murata Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murata Manufacturing and Vicor 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 Vicor are associated (or correlated) with Murata Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murata Manufacturing has no effect on the direction of Vicor i.e., Vicor and Murata Manufacturing go up and down completely randomly.

Pair Corralation between Vicor and Murata Manufacturing

Given the investment horizon of 90 days Vicor is expected to under-perform the Murata Manufacturing. But the stock apears to be less risky and, when comparing its historical volatility, Vicor is 2.05 times less risky than Murata Manufacturing. The stock trades about -0.19 of its potential returns per unit of risk. The Murata Manufacturing Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,777  in Murata Manufacturing Co on September 25, 2024 and sell it today you would lose (164.00) from holding Murata Manufacturing Co or give up 9.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Vicor  vs.  Murata Manufacturing Co

Vicor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vicor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, Vicor reported solid returns over the last few months and may actually be approaching a breakup point.

Murata Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Murata Manufacturing Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Murata Manufacturing is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vicor and Murata Manufacturing

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

The idea behind Vicor and Murata Manufacturing Co 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.