Correlation Between Sensata Technologies and Vishay Precision

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

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

Diversification Opportunities for Sensata Technologies and Vishay Precision

0.41

Correlation Coefficient

Sensata Technologies  Vishay Precision

Very weak diversification

The 3 months correlation between Sensata and Vishay is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sensata Technologies Holding and Vishay Precision Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vishay Precision and Sensata Technologies 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 Sensata Technologies Holding are associated (or correlated) with Vishay Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vishay Precision has no effect on the direction of Sensata Technologies i.e., Sensata Technologies and Vishay Precision go up and down completely randomly.

Pair Corralation between Sensata Technologies and Vishay Precision

Allowing for the 90-day total investment horizon Sensata Technologies Holding is expected to under-perform the Vishay Precision. But the stock apears to be less risky and, when comparing its historical volatility, Sensata Technologies Holding is 1.04 times less risky than Vishay Precision. The stock trades about -0.05 of its potential returns per unit of risk. The Vishay Precision Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,323  in Vishay Precision Group on December 29, 2024 and sell it today you would earn a total of  154.00  from holding Vishay Precision Group or generate 6.63% return on investment over 90 days.

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

Sensata Technologies Holding  vs.  Vishay Precision Group

Sensata Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sensata Technologies Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Vishay Precision

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vishay Precision Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Vishay Precision may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sensata Technologies and Vishay Precision

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

The idea behind Sensata Technologies Holding and Vishay Precision Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .