Correlation Between Avanos Medical and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Avanos Medical 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 Avanos Medical and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avanos Medical and STMicroelectronics NV, you can compare the effects of market volatilities on Avanos Medical 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 Avanos Medical with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avanos Medical and STMicroelectronics.
Diversification Opportunities for Avanos Medical and STMicroelectronics
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Avanos and STMicroelectronics is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Avanos Medical and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Avanos Medical 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 Avanos Medical 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 Avanos Medical i.e., Avanos Medical and STMicroelectronics go up and down completely randomly.
Pair Corralation between Avanos Medical and STMicroelectronics
Assuming the 90 days trading horizon Avanos Medical is expected to generate 1.07 times more return on investment than STMicroelectronics. However, Avanos Medical is 1.07 times more volatile than STMicroelectronics NV. It trades about -0.02 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.03 per unit of risk. If you would invest 2,500 in Avanos Medical on August 31, 2024 and sell it today you would lose (710.00) from holding Avanos Medical or give up 28.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Avanos Medical vs. STMicroelectronics NV
Performance |
| Timeline |
| Avanos Medical |
| STMicroelectronics |
Avanos Medical and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avanos Medical and STMicroelectronics
The main advantage of trading using opposite Avanos Medical and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avanos Medical 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.| Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc |
| STMicroelectronics vs. NVIDIA | STMicroelectronics vs. Taiwan Semiconductor Manufacturing | STMicroelectronics vs. Intel |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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