Correlation Between Small Cap and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Premium and STMicroelectronics NV ADR, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and STMicroelectronics.
Diversification Opportunities for Small Cap and STMicroelectronics
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Small and STMicroelectronics is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and STMicroelectronics NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics NV ADR and Small Cap 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 Small Cap Premium 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 NV ADR has no effect on the direction of Small Cap i.e., Small Cap and STMicroelectronics go up and down completely randomly.
Pair Corralation between Small Cap and STMicroelectronics
Considering the 90-day investment horizon Small Cap Premium is expected to generate 0.15 times more return on investment than STMicroelectronics. However, Small Cap Premium is 6.51 times less risky than STMicroelectronics. It trades about 0.09 of its potential returns per unit of risk. STMicroelectronics NV ADR is currently generating about -0.12 per unit of risk. If you would invest 2,340 in Small Cap Premium on September 12, 2024 and sell it today you would earn a total of 112.00 from holding Small Cap Premium or generate 4.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Premium vs. STMicroelectronics NV ADR
Performance |
| Timeline |
| Small Cap Premium |
| STMicroelectronics NV ADR |
Small Cap and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and STMicroelectronics
The main advantage of trading using opposite Small Cap and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. Voya Global Advantage | Small Cap vs. Ready Capital |
| STMicroelectronics vs. NXP Semiconductors NV | STMicroelectronics vs. Analog Devices | STMicroelectronics vs. ON Semiconductor | STMicroelectronics vs. Lattice Semiconductor |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |