Correlation Between STMicroelectronics and Nine Dragons
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Nine Dragons 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 Nine Dragons into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Nine Dragons Paper, you can compare the effects of market volatilities on STMicroelectronics and Nine Dragons 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 Nine Dragons. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Nine Dragons.
Diversification Opportunities for STMicroelectronics and Nine Dragons
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between STMicroelectronics and Nine is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Nine Dragons Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nine Dragons Paper 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 Nine Dragons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nine Dragons Paper has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Nine Dragons go up and down completely randomly.
Pair Corralation between STMicroelectronics and Nine Dragons
Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Nine Dragons. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 2.1 times less risky than Nine Dragons. The stock trades about -0.04 of its potential returns per unit of risk. The Nine Dragons Paper is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 70.00 in Nine Dragons Paper on November 28, 2024 and sell it today you would lose (31.00) from holding Nine Dragons Paper or give up 44.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Nine Dragons Paper
Performance |
| Timeline |
| STMicroelectronics |
| Nine Dragons Paper |
STMicroelectronics and Nine Dragons Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Nine Dragons
The main advantage of trading using opposite STMicroelectronics and Nine Dragons positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Nine Dragons 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 Nine Dragons will offset losses from the drop in Nine Dragons' long position.| STMicroelectronics vs. METHODE ELECTRONICS | STMicroelectronics vs. Renesas Electronics | STMicroelectronics vs. NAKED WINES PLC | STMicroelectronics vs. ITALIAN WINE BRANDS |
| Nine Dragons vs. United Internet AG | Nine Dragons vs. Japan Asia Investment | Nine Dragons vs. Computershare Limited | Nine Dragons vs. Tamburi Investment Partners |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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