Correlation Between STMicroelectronics and MeVis Medical
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and MeVis 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 MeVis 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 MeVis Medical Solutions, you can compare the effects of market volatilities on STMicroelectronics and MeVis 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 MeVis Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and MeVis Medical.
Diversification Opportunities for STMicroelectronics and MeVis Medical
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between STMicroelectronics and MeVis is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and MeVis Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MeVis Medical Solutions 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 MeVis Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MeVis Medical Solutions has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and MeVis Medical go up and down completely randomly.
Pair Corralation between STMicroelectronics and MeVis Medical
Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the MeVis Medical. In addition to that, STMicroelectronics is 1.7 times more volatile than MeVis Medical Solutions. It trades about -0.1 of its total potential returns per unit of risk. MeVis Medical Solutions is currently generating about 0.02 per unit of volatility. If you would invest 2,265 in MeVis Medical Solutions on September 2, 2024 and sell it today you would earn a total of 135.00 from holding MeVis Medical Solutions or generate 5.96% 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. MeVis Medical Solutions
Performance |
| Timeline |
| STMicroelectronics |
| MeVis Medical Solutions |
STMicroelectronics and MeVis Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and MeVis Medical
The main advantage of trading using opposite STMicroelectronics and MeVis Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, MeVis 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 MeVis Medical will offset losses from the drop in MeVis Medical's long position.The idea behind STMicroelectronics NV and MeVis Medical Solutions 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.| MeVis Medical vs. Apple Inc | MeVis Medical vs. Apple Inc | MeVis Medical vs. Apple Inc | MeVis Medical 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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