Correlation Between STMicroelectronics and Element Solutions
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Element Solutions 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 Element Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Element Solutions, you can compare the effects of market volatilities on STMicroelectronics and Element Solutions 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 Element Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Element Solutions.
Diversification Opportunities for STMicroelectronics and Element Solutions
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMicroelectronics and Element is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element 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 Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Element Solutions go up and down completely randomly.
Pair Corralation between STMicroelectronics and Element Solutions
Assuming the 90 days horizon STMicroelectronics is expected to generate 2.63 times less return on investment than Element Solutions. In addition to that, STMicroelectronics is 2.03 times more volatile than Element Solutions. It trades about 0.01 of its total potential returns per unit of risk. Element Solutions is currently generating about 0.07 per unit of volatility. If you would invest 2,440 in Element Solutions on October 28, 2024 and sell it today you would earn a total of 40.00 from holding Element Solutions or generate 1.64% 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. Element Solutions
Performance |
| Timeline |
| STMicroelectronics |
| Element Solutions |
STMicroelectronics and Element Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Element Solutions
The main advantage of trading using opposite STMicroelectronics and Element Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Element Solutions 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 Element Solutions will offset losses from the drop in Element Solutions' long position.| STMicroelectronics vs. PLAYSTUDIOS A DL 0001 | STMicroelectronics vs. TRADEGATE | STMicroelectronics vs. USWE SPORTS AB | STMicroelectronics vs. ePlay Digital |
| Element Solutions vs. UPDATE SOFTWARE | Element Solutions vs. PLAYWAY SA ZY 10 | Element Solutions vs. Unity Software | Element Solutions vs. Scandinavian Tobacco Group |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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