Correlation Between STMICROELECTRONICS and Murata Manufacturing
Can any of the company-specific risk be diversified away by investing in both STMICROELECTRONICS and Murata Manufacturing 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 Murata Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMICROELECTRONICS and Murata Manufacturing Co, you can compare the effects of market volatilities on STMICROELECTRONICS and Murata Manufacturing 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 Murata Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMICROELECTRONICS and Murata Manufacturing.
Diversification Opportunities for STMICROELECTRONICS and Murata Manufacturing
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STMICROELECTRONICS and Murata is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and Murata Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murata Manufacturing 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 Murata Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murata Manufacturing has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and Murata Manufacturing go up and down completely randomly.
Pair Corralation between STMICROELECTRONICS and Murata Manufacturing
Assuming the 90 days trading horizon STMICROELECTRONICS is expected to generate 1.16 times more return on investment than Murata Manufacturing. However, STMICROELECTRONICS is 1.16 times more volatile than Murata Manufacturing Co. It trades about 0.04 of its potential returns per unit of risk. Murata Manufacturing Co is currently generating about -0.08 per unit of risk. If you would invest 2,485 in STMICROELECTRONICS on September 12, 2024 and sell it today you would earn a total of 27.00 from holding STMICROELECTRONICS or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMICROELECTRONICS vs. Murata Manufacturing Co
Performance |
| Timeline |
| STMICROELECTRONICS |
| Murata Manufacturing |
STMICROELECTRONICS and Murata Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMICROELECTRONICS and Murata Manufacturing
The main advantage of trading using opposite STMICROELECTRONICS and Murata Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMICROELECTRONICS position performs unexpectedly, Murata Manufacturing 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 Murata Manufacturing will offset losses from the drop in Murata Manufacturing's long position.| STMICROELECTRONICS vs. Apple Inc | STMICROELECTRONICS vs. Apple Inc | STMICROELECTRONICS vs. Apple Inc | STMICROELECTRONICS vs. Apple Inc |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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