Correlation Between Ams AG and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Ams AG 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 Ams AG and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ams AG and STMicroelectronics NV, you can compare the effects of market volatilities on Ams AG 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 Ams AG with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ams AG and STMicroelectronics.
Diversification Opportunities for Ams AG and STMicroelectronics
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ams and STMicroelectronics is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ams AG and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Ams AG 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 ams AG 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 Ams AG i.e., Ams AG and STMicroelectronics go up and down completely randomly.
Pair Corralation between Ams AG and STMicroelectronics
Assuming the 90 days horizon ams AG is expected to generate 3.3 times more return on investment than STMicroelectronics. However, Ams AG is 3.3 times more volatile than STMicroelectronics NV. It trades about 0.18 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.06 per unit of risk. If you would invest 356.00 in ams AG on September 13, 2024 and sell it today you would earn a total of 134.00 from holding ams AG or generate 37.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ams AG vs. STMicroelectronics NV
Performance |
| Timeline |
| ams AG |
| STMicroelectronics |
Ams AG and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ams AG and STMicroelectronics
The main advantage of trading using opposite Ams AG and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ams AG 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.| Ams AG vs. Aeluma Inc | Ams AG vs. Odyssey Semiconductor Technologies | Ams AG vs. Rohm Co Ltd | Ams AG vs. Intchains Group Limited |
| STMicroelectronics vs. Silicon Laboratories | STMicroelectronics vs. Power Integrations | STMicroelectronics vs. Diodes Incorporated | STMicroelectronics vs. MaxLinear |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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