Correlation Between STMicroelectronics and Rohm Co
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Rohm Co 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 Rohm Co 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 Rohm Co Ltd, you can compare the effects of market volatilities on STMicroelectronics and Rohm Co 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 Rohm Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Rohm Co.
Diversification Opportunities for STMicroelectronics and Rohm Co
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STMicroelectronics and Rohm is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and Rohm Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rohm Co 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 Rohm Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rohm Co has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Rohm Co go up and down completely randomly.
Pair Corralation between STMicroelectronics and Rohm Co
Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to under-perform the Rohm Co. In addition to that, STMicroelectronics is 1.11 times more volatile than Rohm Co Ltd. It trades about -0.1 of its total potential returns per unit of risk. Rohm Co Ltd is currently generating about -0.1 per unit of volatility. If you would invest 1,825 in Rohm Co Ltd on November 4, 2024 and sell it today you would lose (865.00) from holding Rohm Co Ltd or give up 47.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV ADR vs. Rohm Co Ltd
Performance |
| Timeline |
| STMicroelectronics NV ADR |
| Rohm Co |
STMicroelectronics and Rohm Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Rohm Co
The main advantage of trading using opposite STMicroelectronics and Rohm Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Rohm Co 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 Rohm Co will offset losses from the drop in Rohm Co's long position.| STMicroelectronics vs. NXP Semiconductors NV | STMicroelectronics vs. Analog Devices | STMicroelectronics vs. ON Semiconductor | STMicroelectronics vs. Lattice Semiconductor |
| Rohm Co vs. Renesas Electronics | Rohm Co vs. Power Integrations | Rohm Co vs. MACOM Technology Solutions | Rohm Co vs. Renesas Electronics Corp |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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