Correlation Between Badger Meter and Vishay Precision

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

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

Diversification Opportunities for Badger Meter and Vishay Precision

-0.45

Correlation Coefficient

Badger Meter  Vishay Precision

Very good diversification

The 3 months correlation between Badger and Vishay is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Badger Meter and Vishay Precision Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vishay Precision and Badger Meter 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 Badger Meter 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 Badger Meter i.e., Badger Meter and Vishay Precision go up and down completely randomly.

Pair Corralation between Badger Meter and Vishay Precision

Considering the 90-day investment horizon Badger Meter is expected to generate 0.93 times more return on investment than Vishay Precision. However, Badger Meter is 1.08 times less risky than Vishay Precision. It trades about 0.08 of its potential returns per unit of risk. Vishay Precision Group is currently generating about -0.1 per unit of risk. If you would invest  15,651  in Badger Meter on July 24, 2024 and sell it today you would earn a total of  4,249  from holding Badger Meter or generate 27.15% return on investment over 90 days.

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

Badger Meter  vs.  Vishay Precision Group

Badger Meter

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Badger Meter are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, Badger Meter is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Vishay Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vishay Precision Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in November 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Badger Meter and Vishay Precision

The main advantage of trading using opposite Badger Meter and Vishay Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Badger Meter 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 Badger Meter 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.