Correlation Between Spirent Communications and Vishay Intertechnology

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

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

Diversification Opportunities for Spirent Communications and Vishay Intertechnology

0.41

Correlation Coefficient

Spirent Communications  Vishay Intertechnology

Very weak diversification

The 3 months correlation between Spirent and Vishay is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Vishay Intertechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vishay Intertechnology and Spirent Communications 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 Spirent Communications plc 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 Spirent Communications i.e., Spirent Communications and Vishay Intertechnology go up and down completely randomly.

Pair Corralation between Spirent Communications and Vishay Intertechnology

Assuming the 90 days horizon Spirent Communications plc is expected to generate 0.47 times more return on investment than Vishay Intertechnology. However, Spirent Communications plc is 2.14 times less risky than Vishay Intertechnology. It trades about 0.02 of its potential returns per unit of risk. Vishay Intertechnology is currently generating about -0.05 per unit of risk. If you would invest  212.00  in Spirent Communications plc on October 8, 2024 and sell it today you would earn a total of  4.00  from holding Spirent Communications plc or generate 1.89% return on investment over 90 days.

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

Spirent Communications plc  vs.  Vishay Intertechnology

Spirent Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Spirent Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Vishay Intertechnology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vishay Intertechnology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Spirent Communications and Vishay Intertechnology

The main advantage of trading using opposite Spirent Communications and Vishay Intertechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications 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 Spirent Communications plc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.