Correlation Between Vishay Intertechnology and Renesas Electronics

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

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

Diversification Opportunities for Vishay Intertechnology and Renesas Electronics

0.52

Correlation Coefficient

Vishay Intertechnology  Renesas Electronics

Very weak diversification

The 3 months correlation between Vishay and Renesas is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Vishay Intertechnology and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics 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 Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics has no effect on the direction of Vishay Intertechnology i.e., Vishay Intertechnology and Renesas Electronics go up and down completely randomly.

Pair Corralation between Vishay Intertechnology and Renesas Electronics

Considering the 90-day investment horizon Vishay Intertechnology is expected to generate 0.7 times more return on investment than Renesas Electronics. However, Vishay Intertechnology is 1.42 times less risky than Renesas Electronics. It trades about 0.19 of its potential returns per unit of risk. Renesas Electronics is currently generating about 0.11 per unit of risk. If you would invest  1,696  in Vishay Intertechnology on September 1, 2024 and sell it today you would earn a total of  214.00  from holding Vishay Intertechnology or generate 12.62% return on investment over 90 days.

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

Vishay Intertechnology  vs.  Renesas Electronics

Vishay Intertechnology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vishay Intertechnology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Vishay Intertechnology is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Renesas Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renesas Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Vishay Intertechnology and Renesas Electronics

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

The idea behind Vishay Intertechnology and Renesas 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.