Correlation Between Black Hills and Vishay Intertechnology

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

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

Diversification Opportunities for Black Hills and Vishay Intertechnology

0.37

Correlation Coefficient

Black Hills  Vishay Intertechnology

Weak diversification

The 3 months correlation between Black and Vishay is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Vishay Intertechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vishay Intertechnology and Black Hills 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 Black Hills are associated (or correlated) with Vishay Intertechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vishay Intertechnology has no effect on the direction of Black Hills i.e., Black Hills and Vishay Intertechnology go up and down completely randomly.

Pair Corralation between Black Hills and Vishay Intertechnology

Considering the 90-day investment horizon Black Hills is expected to generate 0.82 times more return on investment than Vishay Intertechnology. However, Black Hills is 1.22 times less risky than Vishay Intertechnology. It trades about 0.02 of its potential returns per unit of risk. Vishay Intertechnology is currently generating about -0.06 per unit of risk. If you would invest  5,220  in Black Hills on January 20, 2024 and sell it today you would earn a total of  26.00  from holding Black Hills or generate 0.5% return on investment over 90 days.

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

Black Hills  vs.  Vishay Intertechnology

Black Hills

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Black Hills are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward-looking signals, Black Hills may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Black Hills and Vishay Intertechnology

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

The idea behind Black Hills and Vishay Intertechnology 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.