Correlation Between STMicroelectronics and Aqua America
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Aqua America 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 Aqua America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Aqua America, you can compare the effects of market volatilities on STMicroelectronics and Aqua America 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 Aqua America. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Aqua America.
Diversification Opportunities for STMicroelectronics and Aqua America
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between STMicroelectronics and Aqua is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Aqua America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua America 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 Aqua America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua America has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Aqua America go up and down completely randomly.
Pair Corralation between STMicroelectronics and Aqua America
Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Aqua America. In addition to that, STMicroelectronics is 1.16 times more volatile than Aqua America. It trades about -0.08 of its total potential returns per unit of risk. Aqua America is currently generating about 0.18 per unit of volatility. If you would invest 3,512 in Aqua America on September 2, 2024 and sell it today you would earn a total of 252.00 from holding Aqua America or generate 7.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Aqua America
Performance |
| Timeline |
| STMicroelectronics |
| Aqua America |
STMicroelectronics and Aqua America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Aqua America
The main advantage of trading using opposite STMicroelectronics and Aqua America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Aqua America 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 Aqua America will offset losses from the drop in Aqua America's long position.The idea behind STMicroelectronics NV and Aqua America pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Aqua America vs. STMicroelectronics NV | Aqua America vs. Elmos Semiconductor SE | Aqua America vs. Arrow Electronics | Aqua America 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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