Correlation Between Rohm Co and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Rohm Co 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 Rohm Co and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rohm Co Ltd and STMicroelectronics NV, you can compare the effects of market volatilities on Rohm Co 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 Rohm Co with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rohm Co and STMicroelectronics.
Diversification Opportunities for Rohm Co and STMicroelectronics
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rohm and STMicroelectronics is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Rohm Co Ltd and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Rohm Co 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 Rohm Co Ltd 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 Rohm Co i.e., Rohm Co and STMicroelectronics go up and down completely randomly.
Pair Corralation between Rohm Co and STMicroelectronics
Assuming the 90 days horizon Rohm Co Ltd is expected to under-perform the STMicroelectronics. But the pink sheet apears to be less risky and, when comparing its historical volatility, Rohm Co Ltd is 1.35 times less risky than STMicroelectronics. The pink sheet trades about -0.31 of its potential returns per unit of risk. The STMicroelectronics NV is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 2,742 in STMicroelectronics NV on August 29, 2024 and sell it today you would lose (206.00) from holding STMicroelectronics NV or give up 7.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rohm Co Ltd vs. STMicroelectronics NV
Performance |
| Timeline |
| Rohm Co |
| STMicroelectronics |
Rohm Co and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rohm Co and STMicroelectronics
The main advantage of trading using opposite Rohm Co and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rohm Co 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.| Rohm Co vs. NVIDIA | Rohm Co vs. Intel | Rohm Co vs. Taiwan Semiconductor Manufacturing | Rohm Co vs. Marvell Technology Group |
| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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