Correlation Between AMG Advanced and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both AMG Advanced and STMicroelectronics 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 AMG Advanced and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AMG Advanced Metallurgical and STMicroelectronics NV, you can compare the effects of market volatilities on AMG Advanced and STMicroelectronics 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 AMG Advanced with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMG Advanced and STMicroelectronics.
Diversification Opportunities for AMG Advanced and STMicroelectronics
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between AMG and STMicroelectronics is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding AMG Advanced Metallurgical and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and AMG Advanced 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 AMG Advanced Metallurgical are associated (or correlated) with STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of AMG Advanced i.e., AMG Advanced and STMicroelectronics go up and down completely randomly.
Pair Corralation between AMG Advanced and STMicroelectronics
Assuming the 90 days trading horizon AMG Advanced Metallurgical is expected to generate 1.07 times more return on investment than STMicroelectronics. However, AMG Advanced is 1.07 times more volatile than STMicroelectronics NV. It trades about -0.07 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.12 per unit of risk. If you would invest 2,078 in AMG Advanced Metallurgical on September 1, 2024 and sell it today you would lose (665.00) from holding AMG Advanced Metallurgical or give up 32.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AMG Advanced Metallurgical vs. STMicroelectronics NV
Performance |
| Timeline |
| AMG Advanced Metallu |
| STMicroelectronics |
AMG Advanced and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AMG Advanced and STMicroelectronics
The main advantage of trading using opposite AMG Advanced and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMG Advanced position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| AMG Advanced vs. DXC Technology Co | AMG Advanced vs. Uber Technologies | AMG Advanced vs. Science in Sport | AMG Advanced vs. Finnair Oyj |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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