Correlation Between Vishay Intertechnology and Smith Douglas

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

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

Diversification Opportunities for Vishay Intertechnology and Smith Douglas

0.57

Correlation Coefficient

Vishay Intertechnology  Smith Douglas

Very weak diversification

The 3 months correlation between Vishay and Smith is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vishay Intertechnology and Smith Douglas Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Douglas Homes and Vishay Intertechnology 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 Vishay Intertechnology are associated (or correlated) with Smith Douglas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Douglas Homes has no effect on the direction of Vishay Intertechnology i.e., Vishay Intertechnology and Smith Douglas go up and down completely randomly.

Pair Corralation between Vishay Intertechnology and Smith Douglas

Considering the 90-day investment horizon Vishay Intertechnology is expected to under-perform the Smith Douglas. But the stock apears to be less risky and, when comparing its historical volatility, Vishay Intertechnology is 1.51 times less risky than Smith Douglas. The stock trades about -0.01 of its potential returns per unit of risk. The Smith Douglas Homes is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,400  in Smith Douglas Homes on September 22, 2024 and sell it today you would earn a total of  382.00  from holding Smith Douglas Homes or generate 15.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	48.09%
Values	Daily Returns

Vishay Intertechnology  vs.  Smith Douglas Homes

Vishay Intertechnology

Risk-Adjusted Performance

0 of 100

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.

Smith Douglas Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smith Douglas Homes 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 technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Vishay Intertechnology and Smith Douglas

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

The idea behind Vishay Intertechnology and Smith Douglas Homes 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.