Correlation Between Vontier Corp and MKS Instruments

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

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

Diversification Opportunities for Vontier Corp and MKS Instruments

0.8

Correlation Coefficient

Vontier Corp  MKS Instruments

Very poor diversification

The 3 months correlation between Vontier and MKS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vontier Corp and MKS Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MKS Instruments and Vontier Corp 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 Vontier Corp are associated (or correlated) with MKS Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MKS Instruments has no effect on the direction of Vontier Corp i.e., Vontier Corp and MKS Instruments go up and down completely randomly.

Pair Corralation between Vontier Corp and MKS Instruments

Considering the 90-day investment horizon Vontier Corp is expected to generate 0.58 times more return on investment than MKS Instruments. However, Vontier Corp is 1.74 times less risky than MKS Instruments. It trades about -0.06 of its potential returns per unit of risk. MKS Instruments is currently generating about -0.09 per unit of risk. If you would invest  3,619  in Vontier Corp on December 28, 2024 and sell it today you would lose (265.00) from holding Vontier Corp or give up 7.32% of portfolio value over 90 days.

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

Vontier Corp  vs.  MKS Instruments

Vontier Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vontier Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

MKS Instruments

Risk-Adjusted Performance

Very Weak

Over the last 90 days MKS Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Vontier Corp and MKS Instruments

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

The idea behind Vontier Corp and MKS Instruments 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.