Correlation Between Archer Materials and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Archer Materials 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 Archer Materials and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Archer Materials Limited and STMicroelectronics NV, you can compare the effects of market volatilities on Archer Materials 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 Archer Materials with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archer Materials and STMicroelectronics.
Diversification Opportunities for Archer Materials and STMicroelectronics
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Archer and STMicroelectronics is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Archer Materials Limited and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Archer Materials 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 Archer Materials Limited 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 Archer Materials i.e., Archer Materials and STMicroelectronics go up and down completely randomly.
Pair Corralation between Archer Materials and STMicroelectronics
Assuming the 90 days horizon Archer Materials Limited is expected to generate 2.48 times more return on investment than STMicroelectronics. However, Archer Materials is 2.48 times more volatile than STMicroelectronics NV. It trades about -0.01 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.06 per unit of risk. If you would invest 22.00 in Archer Materials Limited on September 13, 2024 and sell it today you would lose (2.00) from holding Archer Materials Limited or give up 9.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Archer Materials Limited vs. STMicroelectronics NV
Performance |
| Timeline |
| Archer Materials |
| STMicroelectronics |
Archer Materials and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Archer Materials and STMicroelectronics
The main advantage of trading using opposite Archer Materials and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archer Materials 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.| Archer Materials vs. STMicroelectronics NV | Archer Materials vs. Rohm Co Ltd | Archer Materials vs. Asm Pacific Technology |
| 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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