Correlation Between Sensata Technologies and Vishay Precision

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

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

Diversification Opportunities for Sensata Technologies and Vishay Precision

0.88

Correlation Coefficient

Sensata Technologies  Vishay Precision

Very poor diversification

The 3 months correlation between Sensata and Vishay is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sensata Technologies Holding and Vishay Precision Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vishay Precision and Sensata Technologies 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 Sensata Technologies Holding 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 Sensata Technologies i.e., Sensata Technologies and Vishay Precision go up and down completely randomly.

Pair Corralation between Sensata Technologies and Vishay Precision

Allowing for the 90-day total investment horizon Sensata Technologies Holding is expected to generate 0.86 times more return on investment than Vishay Precision. However, Sensata Technologies Holding is 1.17 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 -0.12 per unit of risk. If you would invest  4,089  in Sensata Technologies Holding on August 30, 2024 and sell it today you would lose (872.00) from holding Sensata Technologies Holding or give up 21.33% of portfolio value over 90 days.

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

Sensata Technologies Holding  vs.  Vishay Precision Group

Sensata Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sensata Technologies Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sensata Technologies and Vishay Precision

The main advantage of trading using opposite Sensata Technologies and Vishay Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensata Technologies 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 Sensata Technologies Holding 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.