Correlation Between Neinor Homes and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Neinor Homes 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 Neinor Homes and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Neinor Homes SA and STMicroelectronics NV, you can compare the effects of market volatilities on Neinor Homes 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 Neinor Homes with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neinor Homes and STMicroelectronics.
Diversification Opportunities for Neinor Homes and STMicroelectronics
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Neinor and STMicroelectronics is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Neinor Homes SA and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Neinor Homes 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 Neinor Homes SA 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 Neinor Homes i.e., Neinor Homes and STMicroelectronics go up and down completely randomly.
Pair Corralation between Neinor Homes and STMicroelectronics
Assuming the 90 days trading horizon Neinor Homes SA is expected to generate 0.82 times more return on investment than STMicroelectronics. However, Neinor Homes SA is 1.22 times less risky than STMicroelectronics. It trades about 0.09 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.03 per unit of risk. If you would invest 725.00 in Neinor Homes SA on August 25, 2024 and sell it today you would earn a total of 805.00 from holding Neinor Homes SA or generate 111.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Neinor Homes SA vs. STMicroelectronics NV
Performance |
| Timeline |
| Neinor Homes SA |
| STMicroelectronics |
Neinor Homes and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Neinor Homes and STMicroelectronics
The main advantage of trading using opposite Neinor Homes and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neinor Homes 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.| Neinor Homes vs. Apple Inc | Neinor Homes vs. Apple Inc | Neinor Homes vs. Apple Inc | Neinor Homes vs. Apple Inc |
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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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