Correlation Between STMicroelectronics and Ping An
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Ping An 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 Ping An into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Ping An Healthcare, you can compare the effects of market volatilities on STMicroelectronics and Ping An 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 Ping An. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Ping An.
Diversification Opportunities for STMicroelectronics and Ping An
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between STMicroelectronics and Ping is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Ping An Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ping An Healthcare 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 NV are associated (or correlated) with Ping An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ping An Healthcare has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Ping An go up and down completely randomly.
Pair Corralation between STMicroelectronics and Ping An
Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Ping An. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 3.35 times less risky than Ping An. The stock trades about -0.25 of its potential returns per unit of risk. The Ping An Healthcare is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 79.00 in Ping An Healthcare on October 9, 2024 and sell it today you would lose (3.00) from holding Ping An Healthcare or give up 3.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Ping An Healthcare
Performance |
| Timeline |
| STMicroelectronics |
| Ping An Healthcare |
STMicroelectronics and Ping An Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Ping An
The main advantage of trading using opposite STMicroelectronics and Ping An positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Ping An 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 Ping An will offset losses from the drop in Ping An's long position.| STMicroelectronics vs. Molina Healthcare | STMicroelectronics vs. NIGHTINGALE HEALTH EO | STMicroelectronics vs. MPH Health Care | STMicroelectronics vs. ANTA SPORTS PRODUCT |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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