Correlation Between Linedata Services and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Linedata Services 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 Linedata Services and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Linedata Services SA and STMicroelectronics NV, you can compare the effects of market volatilities on Linedata Services 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 Linedata Services with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linedata Services and STMicroelectronics.
Diversification Opportunities for Linedata Services and STMicroelectronics
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Linedata and STMicroelectronics is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Linedata Services SA and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Linedata Services 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 Linedata Services SA 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 Linedata Services i.e., Linedata Services and STMicroelectronics go up and down completely randomly.
Pair Corralation between Linedata Services and STMicroelectronics
Assuming the 90 days trading horizon Linedata Services SA is expected to generate 0.8 times more return on investment than STMicroelectronics. However, Linedata Services SA is 1.25 times less risky than STMicroelectronics. It trades about 0.08 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.03 per unit of risk. If you would invest 4,309 in Linedata Services SA on August 26, 2024 and sell it today you would earn a total of 3,671 from holding Linedata Services SA or generate 85.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Linedata Services SA vs. STMicroelectronics NV
Performance |
| Timeline |
| Linedata Services |
| STMicroelectronics |
Linedata Services and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Linedata Services and STMicroelectronics
The main advantage of trading using opposite Linedata Services and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linedata Services 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.| Linedata Services vs. Sword Group SE | Linedata Services vs. Lectra SA | Linedata Services vs. Neurones | Linedata Services vs. Aubay Socit Anonyme |
| STMicroelectronics vs. LVMH Mot Hennessy | STMicroelectronics vs. LOreal SA | STMicroelectronics vs. Hermes International SCA | STMicroelectronics vs. Manitou BF SA |
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 CEOs Directory module to screen CEOs from public companies around the world.
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