Correlation Between STMicroelectronics and Alfa Financial
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Alfa Financial 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 Alfa Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Alfa Financial Software, you can compare the effects of market volatilities on STMicroelectronics and Alfa Financial 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 Alfa Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Alfa Financial.
Diversification Opportunities for STMicroelectronics and Alfa Financial
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMicroelectronics and Alfa is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Alfa Financial Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Financial Software 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 Alfa Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Financial Software has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Alfa Financial go up and down completely randomly.
Pair Corralation between STMicroelectronics and Alfa Financial
Assuming the 90 days trading horizon STMicroelectronics NV is expected to generate 2.9 times more return on investment than Alfa Financial. However, STMicroelectronics is 2.9 times more volatile than Alfa Financial Software. It trades about -0.05 of its potential returns per unit of risk. Alfa Financial Software is currently generating about -0.41 per unit of risk. If you would invest 2,493 in STMicroelectronics NV on October 14, 2024 and sell it today you would lose (71.00) from holding STMicroelectronics NV or give up 2.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Alfa Financial Software
Performance |
| Timeline |
| STMicroelectronics |
| Alfa Financial Software |
STMicroelectronics and Alfa Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Alfa Financial
The main advantage of trading using opposite STMicroelectronics and Alfa Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Alfa Financial 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 Alfa Financial will offset losses from the drop in Alfa Financial's long position.| STMicroelectronics vs. Blackrock World Mining | STMicroelectronics vs. Eastinco Mining Exploration | STMicroelectronics vs. Compal Electronics GDR | STMicroelectronics vs. Air Products Chemicals |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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