Correlation Between Reckitt Benckiser and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Reckitt Benckiser 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 Reckitt Benckiser and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reckitt Benckiser Group and STMicroelectronics NV, you can compare the effects of market volatilities on Reckitt Benckiser 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 Reckitt Benckiser with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reckitt Benckiser and STMicroelectronics.
Diversification Opportunities for Reckitt Benckiser and STMicroelectronics
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Reckitt and STMicroelectronics is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Reckitt Benckiser Group and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Reckitt Benckiser 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 Reckitt Benckiser Group 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 Reckitt Benckiser i.e., Reckitt Benckiser and STMicroelectronics go up and down completely randomly.
Pair Corralation between Reckitt Benckiser and STMicroelectronics
Assuming the 90 days trading horizon Reckitt Benckiser Group is expected to under-perform the STMicroelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Reckitt Benckiser Group is 2.5 times less risky than STMicroelectronics. The stock trades about -0.11 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 2,425 in STMicroelectronics NV on September 5, 2024 and sell it today you would earn a total of 8.00 from holding STMicroelectronics NV or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reckitt Benckiser Group vs. STMicroelectronics NV
Performance |
| Timeline |
| Reckitt Benckiser |
| STMicroelectronics |
Reckitt Benckiser and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reckitt Benckiser and STMicroelectronics
The main advantage of trading using opposite Reckitt Benckiser and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reckitt Benckiser 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.| Reckitt Benckiser vs. STMicroelectronics NV | Reckitt Benckiser vs. Universal Display Corp | Reckitt Benckiser vs. Hochschild Mining plc | Reckitt Benckiser vs. Morgan Advanced Materials |
| STMicroelectronics vs. State Street Corp | STMicroelectronics vs. DXC Technology Co | STMicroelectronics vs. Polar Capital Technology | STMicroelectronics vs. Reckitt Benckiser Group |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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