Correlation Between GP Investments and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both GP Investments 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 GP Investments and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GP Investments and STMicroelectronics NV, you can compare the effects of market volatilities on GP Investments 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 GP Investments with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GP Investments and STMicroelectronics.
Diversification Opportunities for GP Investments and STMicroelectronics
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GPIV33 and STMicroelectronics is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding GP Investments and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and GP Investments 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 GP Investments 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 GP Investments i.e., GP Investments and STMicroelectronics go up and down completely randomly.
Pair Corralation between GP Investments and STMicroelectronics
Assuming the 90 days trading horizon GP Investments is expected to generate 1.15 times more return on investment than STMicroelectronics. However, GP Investments is 1.15 times more volatile than STMicroelectronics NV. It trades about 0.04 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.02 per unit of risk. If you would invest 285.00 in GP Investments on August 27, 2024 and sell it today you would earn a total of 113.00 from holding GP Investments or generate 39.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 77.33% |
| Values | Daily Returns |
GP Investments vs. STMicroelectronics NV
Performance |
| Timeline |
| GP Investments |
| STMicroelectronics |
GP Investments and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GP Investments and STMicroelectronics
The main advantage of trading using opposite GP Investments and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GP Investments 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.| GP Investments vs. Fras le SA | GP Investments vs. Clave Indices De | GP Investments vs. BTG Pactual Logstica | GP Investments vs. Telefonaktiebolaget LM Ericsson |
| STMicroelectronics vs. GP Investments | STMicroelectronics vs. Fidelity National Information | STMicroelectronics vs. Verizon Communications | STMicroelectronics vs. Marfrig Global Foods |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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