Correlation Between Analog Devices and Vishay Intertechnology

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

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

Diversification Opportunities for Analog Devices and Vishay Intertechnology

0.54

Correlation Coefficient

Analog Devices  Vishay Intertechnology

Very weak diversification

The 3 months correlation between Analog and Vishay is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Vishay Intertechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vishay Intertechnology and Analog Devices 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 Analog Devices 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 Analog Devices i.e., Analog Devices and Vishay Intertechnology go up and down completely randomly.

Pair Corralation between Analog Devices and Vishay Intertechnology

Considering the 90-day investment horizon Analog Devices is expected to generate 0.97 times more return on investment than Vishay Intertechnology. However, Analog Devices is 1.03 times less risky than Vishay Intertechnology. It trades about 0.04 of its potential returns per unit of risk. Vishay Intertechnology is currently generating about -0.04 per unit of risk. If you would invest  19,076  in Analog Devices on October 7, 2024 and sell it today you would earn a total of  2,461  from holding Analog Devices or generate 12.9% return on investment over 90 days.

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

Analog Devices  vs.  Vishay Intertechnology

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 Analog Devices and Vishay Intertechnology

The main advantage of trading using opposite Analog Devices and Vishay Intertechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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 Analog Devices 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.