Correlation Between STMicroelectronics and ARB
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and ARB 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 ARB 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 ARB Limited, you can compare the effects of market volatilities on STMicroelectronics and ARB 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 ARB. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and ARB.
Diversification Opportunities for STMicroelectronics and ARB
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STMicroelectronics and ARB is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and ARB Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARB Limited 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 ARB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARB Limited has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and ARB go up and down completely randomly.
Pair Corralation between STMicroelectronics and ARB
Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to under-perform the ARB. In addition to that, STMicroelectronics is 1.83 times more volatile than ARB Limited. It trades about -0.02 of its total potential returns per unit of risk. ARB Limited is currently generating about 0.07 per unit of volatility. If you would invest 1,873 in ARB Limited on September 12, 2024 and sell it today you would earn a total of 619.00 from holding ARB Limited or generate 33.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 70.91% |
| Values | Daily Returns |
STMicroelectronics NV ADR vs. ARB Limited
Performance |
| Timeline |
| STMicroelectronics NV ADR |
| ARB Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
STMicroelectronics and ARB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and ARB
The main advantage of trading using opposite STMicroelectronics and ARB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, ARB 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 ARB will offset losses from the drop in ARB's long position.| STMicroelectronics vs. NXP Semiconductors NV | STMicroelectronics vs. Analog Devices | STMicroelectronics vs. ON Semiconductor | STMicroelectronics vs. Lattice Semiconductor |
| ARB vs. GAMCO Global Gold | ARB vs. Advanced Micro Devices | ARB vs. STMicroelectronics NV ADR | ARB vs. Amkor Technology |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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