Correlation Between Cairo Communication and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Cairo Communication 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 Cairo Communication and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cairo Communication SpA and STMicroelectronics NV, you can compare the effects of market volatilities on Cairo Communication 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 Cairo Communication with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairo Communication and STMicroelectronics.
Diversification Opportunities for Cairo Communication and STMicroelectronics
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cairo and STMicroelectronics is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Cairo Communication SpA and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Cairo Communication 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 Cairo Communication SpA 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 Cairo Communication i.e., Cairo Communication and STMicroelectronics go up and down completely randomly.
Pair Corralation between Cairo Communication and STMicroelectronics
Assuming the 90 days trading horizon Cairo Communication SpA is expected to generate 0.88 times more return on investment than STMicroelectronics. However, Cairo Communication SpA is 1.13 times less risky than STMicroelectronics. It trades about 0.09 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.1 per unit of risk. If you would invest 161.00 in Cairo Communication SpA on September 4, 2024 and sell it today you would earn a total of 73.00 from holding Cairo Communication SpA or generate 45.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cairo Communication SpA vs. STMicroelectronics NV
Performance |
| Timeline |
| Cairo Communication SpA |
| STMicroelectronics |
Cairo Communication and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairo Communication and STMicroelectronics
The main advantage of trading using opposite Cairo Communication and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairo Communication 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.| Cairo Communication vs. Ecofin Global Utilities | Cairo Communication vs. Target Healthcare REIT | Cairo Communication vs. Cardinal Health | Cairo Communication vs. Charter Communications Cl |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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