Correlation Between Vishay Precision and Hexagon AB

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

By analyzing existing cross correlation between Vishay Precision Group and Hexagon AB ADR, you can compare the effects of market volatilities on Vishay Precision and Hexagon AB 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 Precision with a short position of Hexagon AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vishay Precision and Hexagon AB.

Diversification Opportunities for Vishay Precision and Hexagon AB

0.83

Correlation Coefficient

Vishay Precision  Hexagon AB

Very poor diversification

The 3 months correlation between Vishay and Hexagon is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vishay Precision Group and Hexagon AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexagon AB ADR and Vishay Precision 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 Precision Group are associated (or correlated) with Hexagon AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexagon AB ADR has no effect on the direction of Vishay Precision i.e., Vishay Precision and Hexagon AB go up and down completely randomly.

Pair Corralation between Vishay Precision and Hexagon AB

Considering the 90-day investment horizon Vishay Precision Group is expected to under-perform the Hexagon AB. In addition to that, Vishay Precision is 1.08 times more volatile than Hexagon AB ADR. It trades about -0.03 of its total potential returns per unit of risk. Hexagon AB ADR is currently generating about 0.01 per unit of volatility. If you would invest  1,018  in Hexagon AB ADR on September 13, 2024 and sell it today you would lose (32.00) from holding Hexagon AB ADR or give up 3.14% of portfolio value over 90 days.

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

Vishay Precision Group  vs.  Hexagon AB ADR

Vishay Precision

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vishay Precision Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vishay Precision is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Hexagon AB ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hexagon AB ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Hexagon AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vishay Precision and Hexagon AB

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

The idea behind Vishay Precision Group and Hexagon AB ADR 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.