Correlation Between Vicor and Benchmark Electronics

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

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

Diversification Opportunities for Vicor and Benchmark Electronics

0.93

Correlation Coefficient

Vicor  Benchmark Electronics

Almost no diversification

The 3 months correlation between Vicor and Benchmark is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vicor and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Electronics and Vicor 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 Vicor are associated (or correlated) with Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of Vicor i.e., Vicor and Benchmark Electronics go up and down completely randomly.

Pair Corralation between Vicor and Benchmark Electronics

Given the investment horizon of 90 days Vicor is expected to generate 1.68 times more return on investment than Benchmark Electronics. However, Vicor is 1.68 times more volatile than Benchmark Electronics. It trades about 0.21 of its potential returns per unit of risk. Benchmark Electronics is currently generating about 0.14 per unit of risk. If you would invest  3,581  in Vicor on September 4, 2024 and sell it today you would earn a total of  2,188  from holding Vicor or generate 61.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Vicor  vs.  Benchmark Electronics

Vicor

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vicor are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, Vicor reported solid returns over the last few months and may actually be approaching a breakup point.

Benchmark Electronics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Benchmark Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vicor and Benchmark Electronics

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

The idea behind Vicor and Benchmark 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.