Correlation Between Japan Medical and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Japan Medical 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 Japan Medical and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Medical Dynamic and STMicroelectronics NV, you can compare the effects of market volatilities on Japan Medical 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 Japan Medical with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Medical and STMicroelectronics.
Diversification Opportunities for Japan Medical and STMicroelectronics
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Japan and STMicroelectronics is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Japan Medical Dynamic and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Japan Medical 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 Japan Medical Dynamic 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 Japan Medical i.e., Japan Medical and STMicroelectronics go up and down completely randomly.
Pair Corralation between Japan Medical and STMicroelectronics
Assuming the 90 days horizon Japan Medical Dynamic is expected to under-perform the STMicroelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Japan Medical Dynamic is 1.24 times less risky than STMicroelectronics. The stock trades about -0.05 of its potential returns per unit of risk. The STMicroelectronics NV is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 3,633 in STMicroelectronics NV on September 2, 2024 and sell it today you would lose (1,252) from holding STMicroelectronics NV or give up 34.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japan Medical Dynamic vs. STMicroelectronics NV
Performance |
| Timeline |
| Japan Medical Dynamic |
| STMicroelectronics |
Japan Medical and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Medical and STMicroelectronics
The main advantage of trading using opposite Japan Medical and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Medical 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.| Japan Medical vs. InterContinental Hotels Group | Japan Medical vs. MIRAMAR HOTEL INV | Japan Medical vs. GRIFFIN MINING LTD | Japan Medical vs. Host Hotels Resorts |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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