Correlation Between STMicroelectronics and JD Sports
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and JD Sports 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 JD Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and JD Sports Fashion, you can compare the effects of market volatilities on STMicroelectronics and JD Sports 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 JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and JD Sports.
Diversification Opportunities for STMicroelectronics and JD Sports
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STMicroelectronics and JD Sports is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion 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 JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and JD Sports go up and down completely randomly.
Pair Corralation between STMicroelectronics and JD Sports
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the JD Sports. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.26 times less risky than JD Sports. The stock trades about -0.16 of its potential returns per unit of risk. The JD Sports Fashion is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 12,456 in JD Sports Fashion on September 5, 2024 and sell it today you would lose (2,166) from holding JD Sports Fashion or give up 17.39% 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. JD Sports Fashion
Performance |
| Timeline |
| STMicroelectronics |
| JD Sports Fashion |
STMicroelectronics and JD Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and JD Sports
The main advantage of trading using opposite STMicroelectronics and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, JD Sports 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 JD Sports will offset losses from the drop in JD Sports' long position.| STMicroelectronics vs. State Street Corp | STMicroelectronics vs. DXC Technology Co | STMicroelectronics vs. Polar Capital Technology | STMicroelectronics vs. Reckitt Benckiser Group |
| JD Sports vs. Hyundai Motor | JD Sports vs. Toyota Motor Corp | JD Sports vs. SoftBank Group Corp | JD Sports vs. Halyk Bank of |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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