Correlation Between STMicroelectronics and Tower Semiconductor
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Tower Semiconductor 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 Tower Semiconductor 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 Tower Semiconductor, you can compare the effects of market volatilities on STMicroelectronics and Tower Semiconductor 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 Tower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Tower Semiconductor.
Diversification Opportunities for STMicroelectronics and Tower Semiconductor
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between STMicroelectronics and Tower is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor 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 Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Tower Semiconductor go up and down completely randomly.
Pair Corralation between STMicroelectronics and Tower Semiconductor
Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to under-perform the Tower Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV ADR is 1.69 times less risky than Tower Semiconductor. The stock trades about -0.07 of its potential returns per unit of risk. The Tower Semiconductor is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 4,310 in Tower Semiconductor on September 13, 2024 and sell it today you would earn a total of 701.00 from holding Tower Semiconductor or generate 16.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV ADR vs. Tower Semiconductor
Performance |
| Timeline |
| STMicroelectronics NV ADR |
| Tower Semiconductor |
STMicroelectronics and Tower Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Tower Semiconductor
The main advantage of trading using opposite STMicroelectronics and Tower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Tower Semiconductor 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 Tower Semiconductor will offset losses from the drop in Tower Semiconductor's long position.| STMicroelectronics vs. NXP Semiconductors NV | STMicroelectronics vs. Analog Devices | STMicroelectronics vs. ON Semiconductor | STMicroelectronics vs. Lattice Semiconductor |
| Tower Semiconductor vs. Nova | Tower Semiconductor vs. AudioCodes | Tower Semiconductor vs. Nice Ltd ADR | Tower Semiconductor vs. Elbit Systems |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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