Correlation Between Catena Media and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Catena Media 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 Catena Media and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Catena Media PLC and STMicroelectronics NV, you can compare the effects of market volatilities on Catena Media 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 Catena Media with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catena Media and STMicroelectronics.
Diversification Opportunities for Catena Media and STMicroelectronics
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Catena and STMicroelectronics is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Catena Media PLC and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Catena Media 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 Catena Media PLC 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 Catena Media i.e., Catena Media and STMicroelectronics go up and down completely randomly.
Pair Corralation between Catena Media and STMicroelectronics
Assuming the 90 days trading horizon Catena Media PLC is expected to generate 0.6 times more return on investment than STMicroelectronics. However, Catena Media PLC is 1.68 times less risky than STMicroelectronics. It trades about -0.06 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.28 per unit of risk. If you would invest 403.00 in Catena Media PLC on November 6, 2024 and sell it today you would lose (7.00) from holding Catena Media PLC or give up 1.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Catena Media PLC vs. STMicroelectronics NV
Performance |
| Timeline |
| Catena Media PLC |
| STMicroelectronics |
Catena Media and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Catena Media and STMicroelectronics
The main advantage of trading using opposite Catena Media and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catena Media 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.| Catena Media vs. JB Hunt Transport | Catena Media vs. Cars Inc | Catena Media vs. Tatton Asset Management | Catena Media vs. Check Point Software |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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