Correlation Between Reworld Media and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Reworld Media 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 Reworld Media and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reworld Media and STMicroelectronics NV, you can compare the effects of market volatilities on Reworld Media 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 Reworld Media with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reworld Media and STMicroelectronics.
Diversification Opportunities for Reworld Media and STMicroelectronics
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Reworld and STMicroelectronics is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Reworld Media and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Reworld Media 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 Reworld Media 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 Reworld Media i.e., Reworld Media and STMicroelectronics go up and down completely randomly.
Pair Corralation between Reworld Media and STMicroelectronics
Assuming the 90 days trading horizon Reworld Media is expected to under-perform the STMicroelectronics. In addition to that, Reworld Media is 1.22 times more volatile than STMicroelectronics NV. It trades about -0.4 of its total potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.13 per unit of volatility. If you would invest 2,631 in STMicroelectronics NV on August 29, 2024 and sell it today you would lose (186.00) from holding STMicroelectronics NV or give up 7.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reworld Media vs. STMicroelectronics NV
Performance |
| Timeline |
| Reworld Media |
| STMicroelectronics |
Reworld Media and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reworld Media and STMicroelectronics
The main advantage of trading using opposite Reworld Media and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reworld Media 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.| Reworld Media vs. Manitou BF SA | Reworld Media vs. Ossiam Minimum Variance | Reworld Media vs. Ekinops SA | Reworld Media vs. Orapi SA |
| STMicroelectronics vs. LVMH Mot Hennessy | STMicroelectronics vs. LOreal SA | STMicroelectronics vs. Hermes International SCA | STMicroelectronics vs. Manitou BF SA |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |