Correlation Between STMicroelectronics and FORWARD AIR
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and FORWARD AIR 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 FORWARD AIR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and FORWARD AIR P, you can compare the effects of market volatilities on STMicroelectronics and FORWARD AIR 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 FORWARD AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and FORWARD AIR.
Diversification Opportunities for STMicroelectronics and FORWARD AIR
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMicroelectronics and FORWARD is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and FORWARD AIR P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORWARD AIR P 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 FORWARD AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORWARD AIR P has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and FORWARD AIR go up and down completely randomly.
Pair Corralation between STMicroelectronics and FORWARD AIR
Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the FORWARD AIR. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 2.99 times less risky than FORWARD AIR. The stock trades about -0.08 of its potential returns per unit of risk. The FORWARD AIR P is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,220 in FORWARD AIR P on September 2, 2024 and sell it today you would earn a total of 140.00 from holding FORWARD AIR P or generate 4.35% 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. FORWARD AIR P
Performance |
| Timeline |
| STMicroelectronics |
| FORWARD AIR P |
STMicroelectronics and FORWARD AIR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and FORWARD AIR
The main advantage of trading using opposite STMicroelectronics and FORWARD AIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, FORWARD AIR 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 FORWARD AIR will offset losses from the drop in FORWARD AIR's long position.The idea behind STMicroelectronics NV and FORWARD AIR P 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.| FORWARD AIR vs. Apple Inc | FORWARD AIR vs. Apple Inc | FORWARD AIR vs. Apple Inc | FORWARD AIR vs. Apple Inc |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |