Correlation Between STMicroelectronics and Japan Medical
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Japan Medical 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 Japan Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Japan Medical Dynamic, you can compare the effects of market volatilities on STMicroelectronics and Japan Medical 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 Japan Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Japan Medical.
Diversification Opportunities for STMicroelectronics and Japan Medical
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between STMicroelectronics and Japan is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Japan Medical Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Medical Dynamic 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 Japan Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Medical Dynamic has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Japan Medical go up and down completely randomly.
Pair Corralation between STMicroelectronics and Japan Medical
Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Japan Medical. In addition to that, STMicroelectronics is 1.29 times more volatile than Japan Medical Dynamic. It trades about -0.1 of its total potential returns per unit of risk. Japan Medical Dynamic is currently generating about -0.03 per unit of volatility. If you would invest 442.00 in Japan Medical Dynamic on September 2, 2024 and sell it today you would lose (64.00) from holding Japan Medical Dynamic or give up 14.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Japan Medical Dynamic
Performance |
| Timeline |
| STMicroelectronics |
| Japan Medical Dynamic |
STMicroelectronics and Japan Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Japan Medical
The main advantage of trading using opposite STMicroelectronics and Japan Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Japan Medical 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 Japan Medical will offset losses from the drop in Japan Medical's long position.The idea behind STMicroelectronics NV and Japan Medical Dynamic 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.| Japan Medical vs. InterContinental Hotels Group | Japan Medical vs. MIRAMAR HOTEL INV | Japan Medical vs. GRIFFIN MINING LTD | Japan Medical vs. Host Hotels Resorts |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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