Correlation Between Innelec Multimedia and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Innelec Multimedia 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 Innelec Multimedia and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innelec Multimedia and STMicroelectronics NV, you can compare the effects of market volatilities on Innelec Multimedia 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 Innelec Multimedia with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innelec Multimedia and STMicroelectronics.
Diversification Opportunities for Innelec Multimedia and STMicroelectronics
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Innelec and STMicroelectronics is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Innelec Multimedia and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Innelec Multimedia 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 Innelec Multimedia 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 Innelec Multimedia i.e., Innelec Multimedia and STMicroelectronics go up and down completely randomly.
Pair Corralation between Innelec Multimedia and STMicroelectronics
Assuming the 90 days trading horizon Innelec Multimedia is expected to generate 0.72 times more return on investment than STMicroelectronics. However, Innelec Multimedia is 1.38 times less risky than STMicroelectronics. It trades about -0.05 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.21 per unit of risk. If you would invest 310.00 in Innelec Multimedia on August 25, 2024 and sell it today you would lose (6.00) from holding Innelec Multimedia or give up 1.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innelec Multimedia vs. STMicroelectronics NV
Performance |
| Timeline |
| Innelec Multimedia |
| STMicroelectronics |
Innelec Multimedia and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innelec Multimedia and STMicroelectronics
The main advantage of trading using opposite Innelec Multimedia and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innelec Multimedia 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.| Innelec Multimedia vs. Stef SA | Innelec Multimedia vs. Bonduelle SCA | Innelec Multimedia vs. Lisi SA | Innelec Multimedia vs. Interparfums SA |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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