Correlation Between STMicroelectronics and Shell Plc
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Shell Plc 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 Shell Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Shell plc, you can compare the effects of market volatilities on STMicroelectronics and Shell Plc 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 Shell Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Shell Plc.
Diversification Opportunities for STMicroelectronics and Shell Plc
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMicroelectronics and Shell is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Shell plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell 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 Shell Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shell plc has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Shell Plc go up and down completely randomly.
Pair Corralation between STMicroelectronics and Shell Plc
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Shell Plc. In addition to that, STMicroelectronics is 2.35 times more volatile than Shell plc. It trades about -0.22 of its total potential returns per unit of risk. Shell plc is currently generating about 0.11 per unit of volatility. If you would invest 257,750 in Shell plc on November 7, 2024 and sell it today you would earn a total of 7,450 from holding Shell plc or generate 2.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Shell plc
Performance |
| Timeline |
| STMicroelectronics |
| Shell plc |
STMicroelectronics and Shell Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Shell Plc
The main advantage of trading using opposite STMicroelectronics and Shell Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Shell Plc 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 Shell Plc will offset losses from the drop in Shell Plc's long position.| STMicroelectronics vs. Alliance Data Systems | STMicroelectronics vs. Extra Space Storage | STMicroelectronics vs. GlobalData PLC | STMicroelectronics vs. Odfjell Drilling |
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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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