Correlation Between GMO Internet and STMICROELECTRONICS
Can any of the company-specific risk be diversified away by investing in both GMO Internet 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 GMO Internet and STMICROELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMO Internet and STMICROELECTRONICS, you can compare the effects of market volatilities on GMO Internet 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 GMO Internet with a short position of STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMO Internet and STMICROELECTRONICS.
Diversification Opportunities for GMO Internet and STMICROELECTRONICS
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GMO and STMICROELECTRONICS is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS and GMO Internet 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 GMO Internet 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 GMO Internet i.e., GMO Internet and STMICROELECTRONICS go up and down completely randomly.
Pair Corralation between GMO Internet and STMICROELECTRONICS
Assuming the 90 days horizon GMO Internet is expected to generate 0.48 times more return on investment than STMICROELECTRONICS. However, GMO Internet is 2.06 times less risky than STMICROELECTRONICS. It trades about 0.2 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.16 per unit of risk. If you would invest 1,590 in GMO Internet on November 6, 2024 and sell it today you would earn a total of 90.00 from holding GMO Internet or generate 5.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMO Internet vs. STMICROELECTRONICS
Performance |
| Timeline |
| GMO Internet |
| STMICROELECTRONICS |
GMO Internet and STMICROELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMO Internet and STMICROELECTRONICS
The main advantage of trading using opposite GMO Internet and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMO Internet 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's long position.| GMO Internet vs. Lamar Advertising | GMO Internet vs. PACIFIC ONLINE | GMO Internet vs. CarsalesCom | GMO Internet vs. SALESFORCE INC CDR |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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