Correlation Between Renesas Electronics and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Renesas Electronics 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 Renesas Electronics and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Renesas Electronics Corp and STMicroelectronics NV, you can compare the effects of market volatilities on Renesas Electronics 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 Renesas Electronics with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renesas Electronics and STMicroelectronics.
Diversification Opportunities for Renesas Electronics and STMicroelectronics
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Renesas and STMicroelectronics is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics Corp and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Renesas Electronics 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 Renesas Electronics Corp 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 Renesas Electronics i.e., Renesas Electronics and STMicroelectronics go up and down completely randomly.
Pair Corralation between Renesas Electronics and STMicroelectronics
Assuming the 90 days horizon Renesas Electronics Corp is expected to generate 0.72 times more return on investment than STMicroelectronics. However, Renesas Electronics Corp is 1.39 times less risky than STMicroelectronics. It trades about -0.07 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.08 per unit of risk. If you would invest 680.00 in Renesas Electronics Corp on August 29, 2024 and sell it today you would lose (30.00) from holding Renesas Electronics Corp or give up 4.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Renesas Electronics Corp vs. STMicroelectronics NV
Performance |
| Timeline |
| Renesas Electronics Corp |
| STMicroelectronics |
Renesas Electronics and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Renesas Electronics and STMicroelectronics
The main advantage of trading using opposite Renesas Electronics and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renesas Electronics 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.| Renesas Electronics vs. Rohm Co Ltd | Renesas Electronics vs. Infineon Technologies AG | Renesas Electronics vs. Quantum eMotion | Renesas Electronics vs. STMicroelectronics NV |
| STMicroelectronics vs. Silicon Laboratories | STMicroelectronics vs. Power Integrations | STMicroelectronics vs. Diodes Incorporated | STMicroelectronics vs. MaxLinear |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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