Correlation Between STMicroelectronics and Ameren Illinois
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Ameren Illinois 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 Ameren Illinois 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 Ameren Illinois, you can compare the effects of market volatilities on STMicroelectronics and Ameren Illinois 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 Ameren Illinois. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Ameren Illinois.
Diversification Opportunities for STMicroelectronics and Ameren Illinois
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between STMicroelectronics and Ameren is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and Ameren Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Illinois 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 Ameren Illinois. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Illinois has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Ameren Illinois go up and down completely randomly.
Pair Corralation between STMicroelectronics and Ameren Illinois
Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to under-perform the Ameren Illinois. In addition to that, STMicroelectronics is 3.61 times more volatile than Ameren Illinois. It trades about -0.08 of its total potential returns per unit of risk. Ameren Illinois is currently generating about -0.11 per unit of volatility. If you would invest 6,701 in Ameren Illinois on October 10, 2024 and sell it today you would lose (101.00) from holding Ameren Illinois or give up 1.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV ADR vs. Ameren Illinois
Performance |
| Timeline |
| STMicroelectronics NV ADR |
| Ameren Illinois |
STMicroelectronics and Ameren Illinois Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Ameren Illinois
The main advantage of trading using opposite STMicroelectronics and Ameren Illinois positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Ameren Illinois 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 Ameren Illinois will offset losses from the drop in Ameren Illinois' long position.| STMicroelectronics vs. NXP Semiconductors NV | STMicroelectronics vs. Analog Devices | STMicroelectronics vs. ON Semiconductor | STMicroelectronics vs. Lattice Semiconductor |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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