Correlation Between STMicroelectronics and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Fast Retailing 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 Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Fast Retailing Co, you can compare the effects of market volatilities on STMicroelectronics and Fast Retailing 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 Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Fast Retailing.
Diversification Opportunities for STMicroelectronics and Fast Retailing
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between STMicroelectronics and Fast is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Fast Retailing go up and down completely randomly.
Pair Corralation between STMicroelectronics and Fast Retailing
Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Fast Retailing. In addition to that, STMicroelectronics is 1.33 times more volatile than Fast Retailing Co. It trades about -0.02 of its total potential returns per unit of risk. Fast Retailing Co is currently generating about 0.07 per unit of volatility. If you would invest 19,000 in Fast Retailing Co on September 24, 2024 and sell it today you would earn a total of 13,140 from holding Fast Retailing Co or generate 69.16% 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. Fast Retailing Co
Performance |
| Timeline |
| STMicroelectronics |
| Fast Retailing |
STMicroelectronics and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Fast Retailing
The main advantage of trading using opposite STMicroelectronics and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Fast Retailing 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 Fast Retailing will offset losses from the drop in Fast Retailing's long position.| STMicroelectronics vs. NVIDIA | STMicroelectronics vs. Taiwan Semiconductor Manufacturing | STMicroelectronics vs. Broadcom | STMicroelectronics vs. Texas Instruments Incorporated |
| Fast Retailing vs. VIENNA INSURANCE GR | Fast Retailing vs. Selective Insurance Group | Fast Retailing vs. Insurance Australia Group | Fast Retailing vs. Reinsurance Group of |
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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