Correlation Between GoldMining and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both GoldMining 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 GoldMining and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GoldMining and STMicroelectronics NV, you can compare the effects of market volatilities on GoldMining 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 GoldMining with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoldMining and STMicroelectronics.
Diversification Opportunities for GoldMining and STMicroelectronics
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between GoldMining and STMicroelectronics is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and GoldMining 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 GoldMining 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 GoldMining i.e., GoldMining and STMicroelectronics go up and down completely randomly.
Pair Corralation between GoldMining and STMicroelectronics
Assuming the 90 days trading horizon GoldMining is expected to generate 1.34 times more return on investment than STMicroelectronics. However, GoldMining is 1.34 times more volatile than STMicroelectronics NV. It trades about 0.01 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.13 per unit of risk. If you would invest 123.00 in GoldMining on August 29, 2024 and sell it today you would lose (2.00) from holding GoldMining or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 50.78% |
| Values | Daily Returns |
GoldMining vs. STMicroelectronics NV
Performance |
| Timeline |
| GoldMining |
| STMicroelectronics |
GoldMining and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GoldMining and STMicroelectronics
The main advantage of trading using opposite GoldMining and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GoldMining 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.| GoldMining vs. Lendinvest PLC | GoldMining vs. Neometals | GoldMining vs. Coor Service Management | GoldMining vs. Albion Technology General |
| STMicroelectronics vs. Neometals | STMicroelectronics vs. Coor Service Management | STMicroelectronics vs. Fidelity Sustainable USD | STMicroelectronics vs. Sancus Lending Group |
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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