Correlation Between Arm Holdings and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Arm Holdings 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 Arm Holdings and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arm Holdings plc and STMicroelectronics NV ADR, you can compare the effects of market volatilities on Arm Holdings 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 Arm Holdings with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arm Holdings and STMicroelectronics.
Diversification Opportunities for Arm Holdings and STMicroelectronics
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Arm and STMicroelectronics is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and STMicroelectronics NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics NV ADR and Arm Holdings 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 Arm Holdings plc 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 NV ADR has no effect on the direction of Arm Holdings i.e., Arm Holdings and STMicroelectronics go up and down completely randomly.
Pair Corralation between Arm Holdings and STMicroelectronics
Considering the 90-day investment horizon Arm Holdings plc is expected to generate 1.3 times more return on investment than STMicroelectronics. However, Arm Holdings is 1.3 times more volatile than STMicroelectronics NV ADR. It trades about 0.03 of its potential returns per unit of risk. STMicroelectronics NV ADR is currently generating about -0.04 per unit of risk. If you would invest 14,197 in Arm Holdings plc on September 12, 2024 and sell it today you would earn a total of 119.00 from holding Arm Holdings plc or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arm Holdings plc vs. STMicroelectronics NV ADR
Performance |
| Timeline |
| Arm Holdings plc |
| STMicroelectronics NV ADR |
Arm Holdings and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arm Holdings and STMicroelectronics
The main advantage of trading using opposite Arm Holdings and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arm Holdings 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.| Arm Holdings vs. NVIDIA | Arm Holdings vs. Taiwan Semiconductor Manufacturing | Arm Holdings vs. Micron Technology | Arm Holdings vs. Qualcomm Incorporated |
| STMicroelectronics vs. NXP Semiconductors NV | STMicroelectronics vs. Analog Devices | STMicroelectronics vs. ON Semiconductor | STMicroelectronics vs. Lattice Semiconductor |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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