Correlation Between STMicroelectronics and BT Group
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and BT Group 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 BT Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and BT Group Plc, you can compare the effects of market volatilities on STMicroelectronics and BT Group 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 BT Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and BT Group.
Diversification Opportunities for STMicroelectronics and BT Group
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMicroelectronics and BT-A is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and BT Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BT Group 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 BT Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BT Group Plc has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and BT Group go up and down completely randomly.
Pair Corralation between STMicroelectronics and BT Group
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the BT Group. In addition to that, STMicroelectronics is 1.21 times more volatile than BT Group Plc. It trades about -0.04 of its total potential returns per unit of risk. BT Group Plc is currently generating about 0.33 per unit of volatility. If you would invest 13,825 in BT Group Plc on September 1, 2024 and sell it today you would earn a total of 2,105 from holding BT Group Plc or generate 15.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
STMicroelectronics NV vs. BT Group Plc
Performance |
| Timeline |
| STMicroelectronics |
| BT Group Plc |
STMicroelectronics and BT Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and BT Group
The main advantage of trading using opposite STMicroelectronics and BT Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, BT Group 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 BT Group will offset losses from the drop in BT Group's long position.| STMicroelectronics vs. Zoom Video Communications | STMicroelectronics vs. Tyson Foods Cl | STMicroelectronics vs. Fevertree Drinks Plc | STMicroelectronics vs. Aeorema Communications Plc |
| BT Group vs. Bloomsbury Publishing Plc | BT Group vs. Bytes Technology | BT Group vs. Spotify Technology SA | BT Group vs. JB Hunt Transport |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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