Correlation Between STMicroelectronics and Primo Brands
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Primo Brands 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 Primo Brands 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 Primo Brands, you can compare the effects of market volatilities on STMicroelectronics and Primo Brands 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 Primo Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Primo Brands.
Diversification Opportunities for STMicroelectronics and Primo Brands
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between STMicroelectronics and Primo is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and Primo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primo Brands 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 Primo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primo Brands has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Primo Brands go up and down completely randomly.
Pair Corralation between STMicroelectronics and Primo Brands
Considering the 90-day investment horizon STMicroelectronics is expected to generate 4.55 times less return on investment than Primo Brands. In addition to that, STMicroelectronics is 1.79 times more volatile than Primo Brands. It trades about 0.02 of its total potential returns per unit of risk. Primo Brands is currently generating about 0.18 per unit of volatility. If you would invest 3,113 in Primo Brands on October 25, 2024 and sell it today you would earn a total of 144.00 from holding Primo Brands or generate 4.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV ADR vs. Primo Brands
Performance |
| Timeline |
| STMicroelectronics NV ADR |
| Primo Brands |
STMicroelectronics and Primo Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Primo Brands
The main advantage of trading using opposite STMicroelectronics and Primo Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Primo Brands 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 Primo Brands will offset losses from the drop in Primo Brands' 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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