Correlation Between STMicroelectronics and Vishay Intertechnology

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Can any of the company-specific risk be diversified away by investing in both STMicroelectronics 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 STMicroelectronics and Vishay Intertechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV ADR and Vishay Intertechnology, you can compare the effects of market volatilities on STMicroelectronics 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 STMicroelectronics with a short position of Vishay Intertechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Vishay Intertechnology.

Diversification Opportunities for STMicroelectronics and Vishay Intertechnology

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between STMicroelectronics and Vishay is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and Vishay Intertechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vishay Intertechnology and STMicroelectronics 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 STMicroelectronics NV ADR 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 STMicroelectronics i.e., STMicroelectronics and Vishay Intertechnology go up and down completely randomly.

Pair Corralation between STMicroelectronics and Vishay Intertechnology

Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to generate 1.0 times more return on investment than Vishay Intertechnology. However, STMicroelectronics NV ADR is 1.0 times less risky than Vishay Intertechnology. It trades about -0.18 of its potential returns per unit of risk. Vishay Intertechnology is currently generating about -0.34 per unit of risk. If you would invest  2,577  in STMicroelectronics NV ADR on October 5, 2024 and sell it today you would lose (147.00) from holding STMicroelectronics NV ADR or give up 5.7% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

STMicroelectronics NV ADR  vs.  Vishay Intertechnology

 Performance 
       Timeline  
STMicroelectronics NV ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days STMicroelectronics NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
Vishay Intertechnology 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

STMicroelectronics and Vishay Intertechnology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with STMicroelectronics and Vishay Intertechnology

The main advantage of trading using opposite STMicroelectronics and Vishay Intertechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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 STMicroelectronics NV ADR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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