Correlation Between STMicroelectronics and ASE Industrial
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and ASE Industrial 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 ASE Industrial 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 ASE Industrial Holding, you can compare the effects of market volatilities on STMicroelectronics and ASE Industrial 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 ASE Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and ASE Industrial.
Diversification Opportunities for STMicroelectronics and ASE Industrial
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between STMicroelectronics and ASE is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding 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 ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and ASE Industrial go up and down completely randomly.
Pair Corralation between STMicroelectronics and ASE Industrial
Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to under-perform the ASE Industrial. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV ADR is 1.0 times less risky than ASE Industrial. The stock trades about -0.1 of its potential returns per unit of risk. The ASE Industrial Holding is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,002 in ASE Industrial Holding on November 2, 2024 and sell it today you would earn a total of 35.50 from holding ASE Industrial Holding or generate 3.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV ADR vs. ASE Industrial Holding
Performance |
| Timeline |
| STMicroelectronics NV ADR |
| ASE Industrial Holding |
STMicroelectronics and ASE Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and ASE Industrial
The main advantage of trading using opposite STMicroelectronics and ASE Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, ASE Industrial 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 ASE Industrial will offset losses from the drop in ASE Industrial's long position.| STMicroelectronics vs. NXP Semiconductors NV | STMicroelectronics vs. Analog Devices | STMicroelectronics vs. ON Semiconductor | STMicroelectronics vs. Lattice Semiconductor |
| ASE Industrial vs. United Microelectronics | ASE Industrial vs. Amkor Technology | ASE Industrial vs. Himax Technologies | ASE Industrial vs. Chunghwa Telecom Co |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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