Correlation Between STMICROELECTRONICS and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both STMICROELECTRONICS and Guangdong Investment 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 STMICROELECTRONICS and Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMICROELECTRONICS and Guangdong Investment Limited, you can compare the effects of market volatilities on STMICROELECTRONICS and Guangdong Investment 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 STMICROELECTRONICS with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMICROELECTRONICS and Guangdong Investment.
Diversification Opportunities for STMICROELECTRONICS and Guangdong Investment
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMICROELECTRONICS and Guangdong is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and STMICROELECTRONICS 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 STMICROELECTRONICS are associated (or correlated) with Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and Guangdong Investment go up and down completely randomly.
Pair Corralation between STMICROELECTRONICS and Guangdong Investment
Assuming the 90 days trading horizon STMICROELECTRONICS is expected to under-perform the Guangdong Investment. But the stock apears to be less risky and, when comparing its historical volatility, STMICROELECTRONICS is 3.2 times less risky than Guangdong Investment. The stock trades about -0.03 of its potential returns per unit of risk. The Guangdong Investment Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 16.00 in Guangdong Investment Limited on October 11, 2024 and sell it today you would earn a total of 56.00 from holding Guangdong Investment Limited or generate 350.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMICROELECTRONICS vs. Guangdong Investment Limited
Performance |
| Timeline |
| STMICROELECTRONICS |
| Guangdong Investment |
STMICROELECTRONICS and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMICROELECTRONICS and Guangdong Investment
The main advantage of trading using opposite STMICROELECTRONICS and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMICROELECTRONICS position performs unexpectedly, Guangdong Investment 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 Guangdong Investment will offset losses from the drop in Guangdong Investment's long position.| STMICROELECTRONICS vs. Wyndham Hotels Resorts | STMICROELECTRONICS vs. Choice Hotels International | STMICROELECTRONICS vs. Summit Hotel Properties | STMICROELECTRONICS vs. Webster Financial |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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