Correlation Between American Public and STMICROELECTRONICS
Can any of the company-specific risk be diversified away by investing in both American Public 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 American Public and STMICROELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Public Education and STMICROELECTRONICS, you can compare the effects of market volatilities on American Public 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 American Public with a short position of STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Public and STMICROELECTRONICS.
Diversification Opportunities for American Public and STMICROELECTRONICS
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and STMICROELECTRONICS is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS and American Public 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 American Public Education 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 American Public i.e., American Public and STMICROELECTRONICS go up and down completely randomly.
Pair Corralation between American Public and STMICROELECTRONICS
Assuming the 90 days horizon American Public Education is expected to generate 1.7 times more return on investment than STMICROELECTRONICS. However, American Public is 1.7 times more volatile than STMICROELECTRONICS. It trades about 0.09 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.1 per unit of risk. If you would invest 1,050 in American Public Education on November 7, 2024 and sell it today you would earn a total of 1,030 from holding American Public Education or generate 98.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Public Education vs. STMICROELECTRONICS
Performance |
| Timeline |
| American Public Education |
| STMICROELECTRONICS |
American Public and STMICROELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Public and STMICROELECTRONICS
The main advantage of trading using opposite American Public and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Public 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's long position.| American Public vs. BRIT AMER TOBACCO | American Public vs. Sunstone Hotel Investors | American Public vs. Cellnex Telecom SA | American Public vs. Xenia Hotels Resorts |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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