Correlation Between TFS FINANCIAL and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both TFS FINANCIAL 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 TFS FINANCIAL and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TFS FINANCIAL and STMicroelectronics NV, you can compare the effects of market volatilities on TFS FINANCIAL 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 TFS FINANCIAL with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of TFS FINANCIAL and STMicroelectronics.
Diversification Opportunities for TFS FINANCIAL and STMicroelectronics
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between TFS and STMicroelectronics is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and TFS FINANCIAL 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 TFS FINANCIAL 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 TFS FINANCIAL i.e., TFS FINANCIAL and STMicroelectronics go up and down completely randomly.
Pair Corralation between TFS FINANCIAL and STMicroelectronics
Assuming the 90 days trading horizon TFS FINANCIAL is expected to generate 1.17 times more return on investment than STMicroelectronics. However, TFS FINANCIAL is 1.17 times more volatile than STMicroelectronics NV. It trades about 0.24 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.08 per unit of risk. If you would invest 1,170 in TFS FINANCIAL on September 2, 2024 and sell it today you would earn a total of 160.00 from holding TFS FINANCIAL or generate 13.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TFS FINANCIAL vs. STMicroelectronics NV
Performance |
| Timeline |
| TFS FINANCIAL |
| STMicroelectronics |
TFS FINANCIAL and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TFS FINANCIAL and STMicroelectronics
The main advantage of trading using opposite TFS FINANCIAL and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFS FINANCIAL 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.| TFS FINANCIAL vs. SIVERS SEMICONDUCTORS AB | TFS FINANCIAL vs. Darden Restaurants | TFS FINANCIAL vs. Reliance Steel Aluminum | TFS FINANCIAL vs. Q2M Managementberatung AG |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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