Correlation Between Induction Healthcare and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Induction Healthcare 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 Induction Healthcare and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Induction Healthcare Group and STMicroelectronics NV, you can compare the effects of market volatilities on Induction Healthcare 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 Induction Healthcare with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Induction Healthcare and STMicroelectronics.
Diversification Opportunities for Induction Healthcare and STMicroelectronics
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Induction and STMicroelectronics is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Induction Healthcare Group and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Induction Healthcare 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 Induction Healthcare Group 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 Induction Healthcare i.e., Induction Healthcare and STMicroelectronics go up and down completely randomly.
Pair Corralation between Induction Healthcare and STMicroelectronics
Assuming the 90 days trading horizon Induction Healthcare Group is expected to under-perform the STMicroelectronics. In addition to that, Induction Healthcare is 1.81 times more volatile than STMicroelectronics NV. It trades about -0.08 of its total potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.1 per unit of volatility. If you would invest 4,438 in STMicroelectronics NV on September 4, 2024 and sell it today you would lose (1,985) from holding STMicroelectronics NV or give up 44.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Induction Healthcare Group vs. STMicroelectronics NV
Performance |
| Timeline |
| Induction Healthcare |
| STMicroelectronics |
Induction Healthcare and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Induction Healthcare and STMicroelectronics
The main advantage of trading using opposite Induction Healthcare and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Induction Healthcare 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.| Induction Healthcare vs. Samsung Electronics Co | Induction Healthcare vs. Samsung Electronics Co | Induction Healthcare vs. Hyundai Motor | Induction Healthcare vs. Toyota Motor Corp |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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