Correlation Between STMicroelectronics and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Selective Insurance 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 Selective Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Selective Insurance Group, you can compare the effects of market volatilities on STMicroelectronics and Selective Insurance 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 Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Selective Insurance.
Diversification Opportunities for STMicroelectronics and Selective Insurance
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMicroelectronics and Selective is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Selective Insurance go up and down completely randomly.
Pair Corralation between STMicroelectronics and Selective Insurance
Assuming the 90 days horizon STMicroelectronics NV is expected to generate 1.29 times more return on investment than Selective Insurance. However, STMicroelectronics is 1.29 times more volatile than Selective Insurance Group. It trades about 0.01 of its potential returns per unit of risk. Selective Insurance Group is currently generating about -0.1 per unit of risk. If you would invest 2,533 in STMicroelectronics NV on September 12, 2024 and sell it today you would earn a total of 0.00 from holding STMicroelectronics NV or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Selective Insurance Group
Performance |
| Timeline |
| STMicroelectronics |
| Selective Insurance |
STMicroelectronics and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Selective Insurance
The main advantage of trading using opposite STMicroelectronics and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Selective Insurance 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 Selective Insurance will offset losses from the drop in Selective Insurance's long position.| STMicroelectronics vs. Taiwan Semiconductor Manufacturing | STMicroelectronics vs. Broadcom | STMicroelectronics vs. Superior Plus Corp | STMicroelectronics vs. SIVERS SEMICONDUCTORS AB |
| Selective Insurance vs. QBE Insurance Group | Selective Insurance vs. Insurance Australia Group | Selective Insurance vs. Superior Plus Corp | Selective Insurance vs. SIVERS SEMICONDUCTORS AB |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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