Correlation Between Gamma Communications and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Gamma Communications 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 Gamma Communications and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications PLC and STMicroelectronics NV, you can compare the effects of market volatilities on Gamma Communications 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 Gamma Communications with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and STMicroelectronics.
Diversification Opportunities for Gamma Communications and STMicroelectronics
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gamma and STMicroelectronics is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications PLC and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Gamma Communications 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 Gamma Communications 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 has no effect on the direction of Gamma Communications i.e., Gamma Communications and STMicroelectronics go up and down completely randomly.
Pair Corralation between Gamma Communications and STMicroelectronics
Assuming the 90 days trading horizon Gamma Communications PLC is expected to generate 0.53 times more return on investment than STMicroelectronics. However, Gamma Communications PLC is 1.87 times less risky than STMicroelectronics. It trades about -0.11 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.11 per unit of risk. If you would invest 166,800 in Gamma Communications PLC on August 30, 2024 and sell it today you would lose (9,200) from holding Gamma Communications PLC or give up 5.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gamma Communications PLC vs. STMicroelectronics NV
Performance |
| Timeline |
| Gamma Communications PLC |
| STMicroelectronics |
Gamma Communications and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and STMicroelectronics
The main advantage of trading using opposite Gamma Communications and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications 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.| Gamma Communications vs. CVR Energy | Gamma Communications vs. Viridian Therapeutics | Gamma Communications vs. Dollar Tree | Gamma Communications vs. News Corp Cl |
| STMicroelectronics vs. Neometals | STMicroelectronics vs. Coor Service Management | STMicroelectronics vs. Fidelity Sustainable USD | STMicroelectronics vs. Sancus Lending Group |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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