Correlation Between STMicroelectronics and China Resources
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and China Resources 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 China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and China Resources Beer, you can compare the effects of market volatilities on STMicroelectronics and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and China Resources.
Diversification Opportunities for STMicroelectronics and China Resources
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between STMicroelectronics and China is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and China Resources go up and down completely randomly.
Pair Corralation between STMicroelectronics and China Resources
Assuming the 90 days horizon STMicroelectronics NV is expected to generate 0.7 times more return on investment than China Resources. However, STMicroelectronics NV is 1.42 times less risky than China Resources. It trades about 0.04 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.04 per unit of risk. If you would invest 2,372 in STMicroelectronics NV on October 30, 2024 and sell it today you would earn a total of 51.00 from holding STMicroelectronics NV or generate 2.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. China Resources Beer
Performance |
| Timeline |
| STMicroelectronics |
| China Resources Beer |
STMicroelectronics and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and China Resources
The main advantage of trading using opposite STMicroelectronics and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.| STMicroelectronics vs. LANDSEA GREEN MANAGEMENT | STMicroelectronics vs. Easy Software AG | STMicroelectronics vs. Sunny Optical Technology | STMicroelectronics vs. Check Point Software |
| China Resources vs. American Public Education | China Resources vs. STRAYER EDUCATION | China Resources vs. EMBARK EDUCATION LTD | China Resources vs. DEVRY EDUCATION GRP |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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