Correlation Between STMicroelectronics and Pan American
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Pan American 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 Pan American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Pan American Silver, you can compare the effects of market volatilities on STMicroelectronics and Pan American 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 Pan American. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Pan American.
Diversification Opportunities for STMicroelectronics and Pan American
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between STMicroelectronics and Pan is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver 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 Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Pan American go up and down completely randomly.
Pair Corralation between STMicroelectronics and Pan American
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Pan American. In addition to that, STMicroelectronics is 1.24 times more volatile than Pan American Silver. It trades about -0.11 of its total potential returns per unit of risk. Pan American Silver is currently generating about 0.3 per unit of volatility. If you would invest 3,007 in Pan American Silver on November 4, 2024 and sell it today you would earn a total of 431.00 from holding Pan American Silver or generate 14.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
STMicroelectronics NV vs. Pan American Silver
Performance |
| Timeline |
| STMicroelectronics |
| Pan American Silver |
STMicroelectronics and Pan American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Pan American
The main advantage of trading using opposite STMicroelectronics and Pan American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Pan American 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 Pan American will offset losses from the drop in Pan American's long position.| STMicroelectronics vs. Zegona Communications Plc | STMicroelectronics vs. Geely Automobile Holdings | STMicroelectronics vs. Molson Coors Beverage | STMicroelectronics vs. LBG Media PLC |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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