Correlation Between STMicroelectronics and Advanced Energy
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Advanced Energy 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 Advanced Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV ADR and Advanced Energy Industries, you can compare the effects of market volatilities on STMicroelectronics and Advanced Energy 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 Advanced Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Advanced Energy.
Diversification Opportunities for STMicroelectronics and Advanced Energy
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between STMicroelectronics and Advanced is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and Advanced Energy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Energy Indu 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 ADR are associated (or correlated) with Advanced Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Energy Indu has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Advanced Energy go up and down completely randomly.
Pair Corralation between STMicroelectronics and Advanced Energy
Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to generate 1.01 times more return on investment than Advanced Energy. However, STMicroelectronics is 1.01 times more volatile than Advanced Energy Industries. It trades about -0.14 of its potential returns per unit of risk. Advanced Energy Industries is currently generating about -0.16 per unit of risk. If you would invest 2,414 in STMicroelectronics NV ADR on January 2, 2025 and sell it today you would lose (223.00) from holding STMicroelectronics NV ADR or give up 9.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV ADR vs. Advanced Energy Industries
Performance |
| Timeline |
| STMicroelectronics NV ADR |
| Advanced Energy Indu |
STMicroelectronics and Advanced Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Advanced Energy
The main advantage of trading using opposite STMicroelectronics and Advanced Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Advanced Energy 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 Advanced Energy will offset losses from the drop in Advanced Energy's long position.| STMicroelectronics vs. NXP Semiconductors NV | ||
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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