Correlation Between STMicroelectronics and Industrivarden
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Industrivarden 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 STMicroelectronics and Industrivarden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Industrivarden AB ser, you can compare the effects of market volatilities on STMicroelectronics and Industrivarden 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 STMicroelectronics with a short position of Industrivarden. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Industrivarden.
Diversification Opportunities for STMicroelectronics and Industrivarden
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between STMicroelectronics and Industrivarden is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Industrivarden AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrivarden AB ser and STMicroelectronics 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 STMicroelectronics NV are associated (or correlated) with Industrivarden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrivarden AB ser has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Industrivarden go up and down completely randomly.
Pair Corralation between STMicroelectronics and Industrivarden
Assuming the 90 days trading horizon STMicroelectronics is expected to generate 1.39 times less return on investment than Industrivarden. In addition to that, STMicroelectronics is 2.27 times more volatile than Industrivarden AB ser. It trades about 0.13 of its total potential returns per unit of risk. Industrivarden AB ser is currently generating about 0.42 per unit of volatility. If you would invest 34,550 in Industrivarden AB ser on October 23, 2024 and sell it today you would earn a total of 2,730 from holding Industrivarden AB ser or generate 7.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Industrivarden AB ser
Performance |
| Timeline |
| STMicroelectronics |
| Industrivarden AB ser |
STMicroelectronics and Industrivarden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Industrivarden
The main advantage of trading using opposite STMicroelectronics and Industrivarden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Industrivarden 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 Industrivarden will offset losses from the drop in Industrivarden's long position.| STMicroelectronics vs. International Consolidated Airlines | STMicroelectronics vs. Zegona Communications Plc | STMicroelectronics vs. Griffin Mining | STMicroelectronics vs. Blackrock World Mining |
| Industrivarden vs. One Media iP | Industrivarden vs. Liberty Media Corp | Industrivarden vs. LBG Media PLC | Industrivarden vs. STMicroelectronics NV |
Check out your portfolio center.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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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