Correlation Between STMicroelectronics and Commercial Vehicle
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Commercial Vehicle 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 Commercial Vehicle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Commercial Vehicle Group, you can compare the effects of market volatilities on STMicroelectronics and Commercial Vehicle 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 Commercial Vehicle. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Commercial Vehicle.
Diversification Opportunities for STMicroelectronics and Commercial Vehicle
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STMicroelectronics and Commercial is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Commercial Vehicle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Vehicle 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 Commercial Vehicle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Vehicle has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Commercial Vehicle go up and down completely randomly.
Pair Corralation between STMicroelectronics and Commercial Vehicle
Assuming the 90 days horizon STMicroelectronics NV is expected to generate 0.75 times more return on investment than Commercial Vehicle. However, STMicroelectronics NV is 1.33 times less risky than Commercial Vehicle. It trades about -0.03 of its potential returns per unit of risk. Commercial Vehicle Group is currently generating about -0.05 per unit of risk. If you would invest 3,781 in STMicroelectronics NV on September 3, 2024 and sell it today you would lose (1,400) from holding STMicroelectronics NV or give up 37.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Commercial Vehicle Group
Performance |
| Timeline |
| STMicroelectronics |
| Commercial Vehicle |
STMicroelectronics and Commercial Vehicle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Commercial Vehicle
The main advantage of trading using opposite STMicroelectronics and Commercial Vehicle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Commercial Vehicle 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 Commercial Vehicle will offset losses from the drop in Commercial Vehicle's long position.| STMicroelectronics vs. Align Technology | STMicroelectronics vs. Micron Technology | STMicroelectronics vs. Fukuyama Transporting Co | STMicroelectronics vs. FANDIFI TECHNOLOGY P |
| Commercial Vehicle vs. Apple Inc | Commercial Vehicle vs. Apple Inc | Commercial Vehicle vs. Apple Inc | Commercial Vehicle 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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