Correlation Between Gaming and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Gaming 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 Gaming and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gaming and Leisure and STMicroelectronics NV, you can compare the effects of market volatilities on Gaming 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 Gaming with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaming and STMicroelectronics.
Diversification Opportunities for Gaming and STMicroelectronics
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gaming and STMicroelectronics is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Gaming and Leisure and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Gaming 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 Gaming and Leisure 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 Gaming i.e., Gaming and STMicroelectronics go up and down completely randomly.
Pair Corralation between Gaming and STMicroelectronics
Assuming the 90 days horizon Gaming and Leisure is expected to generate 0.47 times more return on investment than STMicroelectronics. However, Gaming and Leisure is 2.12 times less risky than STMicroelectronics. It trades about 0.12 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.02 per unit of risk. If you would invest 4,590 in Gaming and Leisure on October 26, 2024 and sell it today you would earn a total of 112.00 from holding Gaming and Leisure or generate 2.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gaming and Leisure vs. STMicroelectronics NV
Performance |
| Timeline |
| Gaming and Leisure |
| STMicroelectronics |
Gaming and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gaming and STMicroelectronics
The main advantage of trading using opposite Gaming and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gaming 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.| Gaming vs. Performance Food Group | Gaming vs. GREENX METALS LTD | Gaming vs. Zijin Mining Group | Gaming vs. TreeHouse Foods |
| STMicroelectronics vs. Gaming and Leisure | STMicroelectronics vs. Corsair Gaming | STMicroelectronics vs. ANTA SPORTS PRODUCT | STMicroelectronics vs. Games Workshop 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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