Correlation Between STMicroelectronics and Ebro Foods
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Ebro Foods 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 Ebro Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Ebro Foods, you can compare the effects of market volatilities on STMicroelectronics and Ebro Foods 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 Ebro Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Ebro Foods.
Diversification Opportunities for STMicroelectronics and Ebro Foods
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between STMicroelectronics and Ebro is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Ebro Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods 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 Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Ebro Foods go up and down completely randomly.
Pair Corralation between STMicroelectronics and Ebro Foods
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Ebro Foods. In addition to that, STMicroelectronics is 3.16 times more volatile than Ebro Foods. It trades about -0.13 of its total potential returns per unit of risk. Ebro Foods is currently generating about 0.02 per unit of volatility. If you would invest 1,585 in Ebro Foods on August 31, 2024 and sell it today you would earn a total of 18.00 from holding Ebro Foods or generate 1.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Ebro Foods
Performance |
| Timeline |
| STMicroelectronics |
| Ebro Foods |
STMicroelectronics and Ebro Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Ebro Foods
The main advantage of trading using opposite STMicroelectronics and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Ebro Foods 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 Ebro Foods will offset losses from the drop in Ebro Foods' long position.| STMicroelectronics vs. Science in Sport | STMicroelectronics vs. Zanaga Iron Ore | STMicroelectronics vs. United States Steel | STMicroelectronics vs. Baker Steel Resources |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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