Correlation Between STMICROELECTRONICS and Lundin Energy
Can any of the company-specific risk be diversified away by investing in both STMICROELECTRONICS and Lundin Energy 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 Lundin Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMICROELECTRONICS and Lundin Energy AB, you can compare the effects of market volatilities on STMICROELECTRONICS and Lundin Energy 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 Lundin Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMICROELECTRONICS and Lundin Energy.
Diversification Opportunities for STMICROELECTRONICS and Lundin Energy
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between STMICROELECTRONICS and Lundin is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and Lundin Energy AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Energy AB 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 Lundin Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Energy AB has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and Lundin Energy go up and down completely randomly.
Pair Corralation between STMICROELECTRONICS and Lundin Energy
Assuming the 90 days trading horizon STMICROELECTRONICS is expected to generate 0.56 times more return on investment than Lundin Energy. However, STMICROELECTRONICS is 1.79 times less risky than Lundin Energy. It trades about -0.02 of its potential returns per unit of risk. Lundin Energy AB is currently generating about -0.04 per unit of risk. If you would invest 3,341 in STMICROELECTRONICS on September 14, 2024 and sell it today you would lose (839.00) from holding STMICROELECTRONICS or give up 25.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMICROELECTRONICS vs. Lundin Energy AB
Performance |
| Timeline |
| STMICROELECTRONICS |
| Lundin Energy AB |
STMICROELECTRONICS and Lundin Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMICROELECTRONICS and Lundin Energy
The main advantage of trading using opposite STMICROELECTRONICS and Lundin Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMICROELECTRONICS position performs unexpectedly, Lundin Energy 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 Lundin Energy will offset losses from the drop in Lundin Energy's long position.| STMICROELECTRONICS vs. Apple Inc | STMICROELECTRONICS vs. Apple Inc | STMICROELECTRONICS vs. Apple Inc | STMICROELECTRONICS vs. Apple Inc |
| Lundin Energy vs. MagnaChip Semiconductor Corp | Lundin Energy vs. STMICROELECTRONICS | Lundin Energy vs. Nordic Semiconductor ASA | Lundin Energy vs. Meiko Electronics Co |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Global Correlations Find global opportunities by holding instruments from different markets |