Correlation Between STMicroelectronics and Globalfoundries
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Globalfoundries 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 Globalfoundries 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 Globalfoundries, you can compare the effects of market volatilities on STMicroelectronics and Globalfoundries 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 Globalfoundries. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Globalfoundries.
Diversification Opportunities for STMicroelectronics and Globalfoundries
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between STMicroelectronics and Globalfoundries is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Globalfoundries go up and down completely randomly.
Pair Corralation between STMicroelectronics and Globalfoundries
Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to under-perform the Globalfoundries. In addition to that, STMicroelectronics is 1.61 times more volatile than Globalfoundries. It trades about -0.1 of its total potential returns per unit of risk. Globalfoundries is currently generating about 0.0 per unit of volatility. If you would invest 4,248 in Globalfoundries on November 2, 2024 and sell it today you would lose (11.00) from holding Globalfoundries or give up 0.26% 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. Globalfoundries
Performance |
| Timeline |
| STMicroelectronics NV ADR |
| Globalfoundries |
STMicroelectronics and Globalfoundries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Globalfoundries
The main advantage of trading using opposite STMicroelectronics and Globalfoundries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Globalfoundries 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 Globalfoundries will offset losses from the drop in Globalfoundries' long position.| STMicroelectronics vs. NXP Semiconductors NV | STMicroelectronics vs. Analog Devices | STMicroelectronics vs. ON Semiconductor | STMicroelectronics vs. Lattice Semiconductor |
| Globalfoundries vs. NXP Semiconductors NV | Globalfoundries vs. Analog Devices | Globalfoundries vs. ON Semiconductor | Globalfoundries vs. Lattice Semiconductor |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |