Correlation Between STMicroelectronics and Retail Estates
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Retail Estates 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 Retail Estates into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Retail Estates NV, you can compare the effects of market volatilities on STMicroelectronics and Retail Estates 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 Retail Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Retail Estates.
Diversification Opportunities for STMicroelectronics and Retail Estates
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between STMicroelectronics and Retail is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Retail Estates NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Estates NV 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 Retail Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Estates NV has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Retail Estates go up and down completely randomly.
Pair Corralation between STMicroelectronics and Retail Estates
Assuming the 90 days horizon STMicroelectronics NV is expected to generate 2.01 times more return on investment than Retail Estates. However, STMicroelectronics is 2.01 times more volatile than Retail Estates NV. It trades about -0.01 of its potential returns per unit of risk. Retail Estates NV is currently generating about -0.1 per unit of risk. If you would invest 2,477 in STMicroelectronics NV on November 1, 2024 and sell it today you would lose (72.00) from holding STMicroelectronics NV or give up 2.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Retail Estates NV
Performance |
| Timeline |
| STMicroelectronics |
| Retail Estates NV |
STMicroelectronics and Retail Estates Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Retail Estates
The main advantage of trading using opposite STMicroelectronics and Retail Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Retail Estates 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 Retail Estates will offset losses from the drop in Retail Estates' long position.| STMicroelectronics vs. X FAB Silicon Foundries | STMicroelectronics vs. ADRIATIC METALS LS 013355 | STMicroelectronics vs. UPDATE SOFTWARE | STMicroelectronics vs. Align Technology |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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