Correlation Between Ribbon Communications and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Ribbon Communications 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 Ribbon Communications and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ribbon Communications and STMicroelectronics NV, you can compare the effects of market volatilities on Ribbon Communications 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 Ribbon Communications with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ribbon Communications and STMicroelectronics.
Diversification Opportunities for Ribbon Communications and STMicroelectronics
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ribbon and STMicroelectronics is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ribbon Communications and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Ribbon Communications 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 Ribbon Communications 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 Ribbon Communications i.e., Ribbon Communications and STMicroelectronics go up and down completely randomly.
Pair Corralation between Ribbon Communications and STMicroelectronics
Assuming the 90 days trading horizon Ribbon Communications is expected to generate 0.78 times more return on investment than STMicroelectronics. However, Ribbon Communications is 1.28 times less risky than STMicroelectronics. It trades about -0.02 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.03 per unit of risk. If you would invest 388.00 in Ribbon Communications on October 14, 2024 and sell it today you would lose (4.00) from holding Ribbon Communications or give up 1.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ribbon Communications vs. STMicroelectronics NV
Performance |
| Timeline |
| Ribbon Communications |
| STMicroelectronics |
Ribbon Communications and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ribbon Communications and STMicroelectronics
The main advantage of trading using opposite Ribbon Communications and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ribbon Communications 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.| Ribbon Communications vs. SANOK RUBBER ZY | Ribbon Communications vs. The Yokohama Rubber | Ribbon Communications vs. Mitsubishi Materials | Ribbon Communications vs. Monument Mining Limited |
| STMicroelectronics vs. Cairo Communication SpA | STMicroelectronics vs. Ribbon Communications | STMicroelectronics vs. TELECOM ITALIA | STMicroelectronics vs. Citic Telecom International |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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