Correlation Between STMicroelectronics and Abingdon Health
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Abingdon Health 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 Abingdon Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Abingdon Health Plc, you can compare the effects of market volatilities on STMicroelectronics and Abingdon Health 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 Abingdon Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Abingdon Health.
Diversification Opportunities for STMicroelectronics and Abingdon Health
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STMicroelectronics and Abingdon is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Abingdon Health Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abingdon Health Plc 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 Abingdon Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abingdon Health Plc has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Abingdon Health go up and down completely randomly.
Pair Corralation between STMicroelectronics and Abingdon Health
Assuming the 90 days trading horizon STMicroelectronics NV is expected to generate 1.13 times more return on investment than Abingdon Health. However, STMicroelectronics is 1.13 times more volatile than Abingdon Health Plc. It trades about -0.04 of its potential returns per unit of risk. Abingdon Health Plc is currently generating about -0.21 per unit of risk. If you would invest 2,480 in STMicroelectronics NV on September 2, 2024 and sell it today you would lose (64.00) from holding STMicroelectronics NV or give up 2.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Abingdon Health Plc
Performance |
| Timeline |
| STMicroelectronics |
| Abingdon Health Plc |
STMicroelectronics and Abingdon Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Abingdon Health
The main advantage of trading using opposite STMicroelectronics and Abingdon Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Abingdon Health 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 Abingdon Health will offset losses from the drop in Abingdon Health's long position.| STMicroelectronics vs. Thyssenkrupp AG ON | STMicroelectronics vs. Cloudcoco Group PLC | STMicroelectronics vs. Trainline Plc | STMicroelectronics vs. Diversified Energy |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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