Correlation Between STMicroelectronics and Food Life
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Food Life 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 Food Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Food Life Companies, you can compare the effects of market volatilities on STMicroelectronics and Food Life 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 Food Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Food Life.
Diversification Opportunities for STMicroelectronics and Food Life
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between STMicroelectronics and Food is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Food Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Food Life Companies 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 Food Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Food Life Companies has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Food Life go up and down completely randomly.
Pair Corralation between STMicroelectronics and Food Life
Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Food Life. In addition to that, STMicroelectronics is 1.32 times more volatile than Food Life Companies. It trades about -0.1 of its total potential returns per unit of risk. Food Life Companies is currently generating about 0.12 per unit of volatility. If you would invest 1,720 in Food Life Companies on November 2, 2024 and sell it today you would earn a total of 400.00 from holding Food Life Companies or generate 23.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Food Life Companies
Performance |
| Timeline |
| STMicroelectronics |
| Food Life Companies |
STMicroelectronics and Food Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Food Life
The main advantage of trading using opposite STMicroelectronics and Food Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Food Life 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 Food Life will offset losses from the drop in Food Life's long position.| STMicroelectronics vs. X FAB Silicon Foundries | STMicroelectronics vs. ADRIATIC METALS LS 013355 | STMicroelectronics vs. UPDATE SOFTWARE | STMicroelectronics vs. Align Technology |
| Food Life vs. STEEL DYNAMICS | Food Life vs. CHINA TONTINE WINES | Food Life vs. VIVA WINE GROUP | Food Life vs. Daido Steel 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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