Correlation Between Rightmove PLC and STM Group
Can any of the company-specific risk be diversified away by investing in both Rightmove PLC and STM Group 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 Rightmove PLC and STM Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rightmove PLC and STM Group Plc, you can compare the effects of market volatilities on Rightmove PLC and STM Group 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 Rightmove PLC with a short position of STM Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rightmove PLC and STM Group.
Diversification Opportunities for Rightmove PLC and STM Group
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rightmove and STM is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Rightmove PLC and STM Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STM Group Plc and Rightmove PLC 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 Rightmove PLC are associated (or correlated) with STM Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STM Group Plc has no effect on the direction of Rightmove PLC i.e., Rightmove PLC and STM Group go up and down completely randomly.
Pair Corralation between Rightmove PLC and STM Group
Assuming the 90 days trading horizon Rightmove PLC is expected to generate 4.33 times less return on investment than STM Group. But when comparing it to its historical volatility, Rightmove PLC is 1.59 times less risky than STM Group. It trades about 0.05 of its potential returns per unit of risk. STM Group Plc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 6,050 in STM Group Plc on August 29, 2024 and sell it today you would earn a total of 100.00 from holding STM Group Plc or generate 1.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 22.73% |
| Values | Daily Returns |
Rightmove PLC vs. STM Group Plc
Performance |
| Timeline |
| Rightmove PLC |
| STM Group Plc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Rightmove PLC and STM Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rightmove PLC and STM Group
The main advantage of trading using opposite Rightmove PLC and STM Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rightmove PLC position performs unexpectedly, STM Group 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 STM Group will offset losses from the drop in STM Group's long position.| Rightmove PLC vs. Oakley Capital Investments | Rightmove PLC vs. Darden Restaurants | Rightmove PLC vs. New Residential Investment | Rightmove PLC vs. Various Eateries PLC |
| STM Group vs. Silvercorp Metals | STM Group vs. Bisichi Mining PLC | STM Group vs. International Consolidated Airlines | STM Group vs. Greenroc Mining PLC |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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