Correlation Between STMicroelectronics and American Homes
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and American Homes 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 American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and American Homes 4, you can compare the effects of market volatilities on STMicroelectronics and American Homes 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 American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and American Homes.
Diversification Opportunities for STMicroelectronics and American Homes
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between STMicroelectronics and American is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 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 American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and American Homes go up and down completely randomly.
Pair Corralation between STMicroelectronics and American Homes
Assuming the 90 days horizon STMicroelectronics NV is expected to generate 1.2 times more return on investment than American Homes. However, STMicroelectronics is 1.2 times more volatile than American Homes 4. It trades about 0.01 of its potential returns per unit of risk. American Homes 4 is currently generating about -0.06 per unit of risk. If you would invest 2,421 in STMicroelectronics NV on October 31, 2024 and sell it today you would earn a total of 1.00 from holding STMicroelectronics NV or generate 0.04% 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. American Homes 4
Performance |
| Timeline |
| STMicroelectronics |
| American Homes 4 |
STMicroelectronics and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and American Homes
The main advantage of trading using opposite STMicroelectronics and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.| STMicroelectronics vs. NAKED WINES PLC | STMicroelectronics vs. SOFI TECHNOLOGIES | STMicroelectronics vs. Kingdee International Software | STMicroelectronics vs. Genscript Biotech |
| American Homes vs. RYANAIR HLDGS ADR | American Homes vs. NORWEGIAN AIR SHUT | American Homes vs. Scandinavian Tobacco Group | American Homes vs. JAPAN TOBACCO UNSPADR12 |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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