Correlation Between STORE ELECTRONIC and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both STORE ELECTRONIC 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 STORE ELECTRONIC and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STORE ELECTRONIC and STMicroelectronics NV, you can compare the effects of market volatilities on STORE ELECTRONIC 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 STORE ELECTRONIC with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of STORE ELECTRONIC and STMicroelectronics.
Diversification Opportunities for STORE ELECTRONIC and STMicroelectronics
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between STORE and STMicroelectronics is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding STORE ELECTRONIC and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and STORE ELECTRONIC 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 STORE ELECTRONIC 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 STORE ELECTRONIC i.e., STORE ELECTRONIC and STMicroelectronics go up and down completely randomly.
Pair Corralation between STORE ELECTRONIC and STMicroelectronics
Assuming the 90 days trading horizon STORE ELECTRONIC is expected to generate 0.69 times more return on investment than STMicroelectronics. However, STORE ELECTRONIC is 1.45 times less risky than STMicroelectronics. It trades about -0.04 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.13 per unit of risk. If you would invest 14,400 in STORE ELECTRONIC on August 31, 2024 and sell it today you would lose (220.00) from holding STORE ELECTRONIC or give up 1.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STORE ELECTRONIC vs. STMicroelectronics NV
Performance |
| Timeline |
| STORE ELECTRONIC |
| STMicroelectronics |
STORE ELECTRONIC and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STORE ELECTRONIC and STMicroelectronics
The main advantage of trading using opposite STORE ELECTRONIC and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STORE ELECTRONIC 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.| STORE ELECTRONIC vs. ADRIATIC METALS LS 013355 | STORE ELECTRONIC vs. LION ONE METALS | STORE ELECTRONIC vs. Beijing Media | STORE ELECTRONIC vs. PARKEN Sport Entertainment |
| STMicroelectronics vs. NVIDIA | STMicroelectronics vs. Taiwan Semiconductor Manufacturing | STMicroelectronics vs. Advanced Micro Devices | STMicroelectronics vs. Intel |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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