Correlation Between STMicroelectronics and Infineon Technologies
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Infineon Technologies 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 Infineon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Infineon Technologies AG, you can compare the effects of market volatilities on STMicroelectronics and Infineon Technologies 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 Infineon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Infineon Technologies.
Diversification Opportunities for STMicroelectronics and Infineon Technologies
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STMicroelectronics and Infineon is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Infineon Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infineon Technologies 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 are associated (or correlated) with Infineon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infineon Technologies has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Infineon Technologies go up and down completely randomly.
Pair Corralation between STMicroelectronics and Infineon Technologies
Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Infineon Technologies. In addition to that, STMicroelectronics is 1.12 times more volatile than Infineon Technologies AG. It trades about -0.02 of its total potential returns per unit of risk. Infineon Technologies AG is currently generating about 0.01 per unit of volatility. If you would invest 3,286 in Infineon Technologies AG on August 25, 2024 and sell it today you would lose (186.00) from holding Infineon Technologies AG or give up 5.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.95% |
| Values | Daily Returns |
STMicroelectronics NV vs. Infineon Technologies AG
Performance |
| Timeline |
| STMicroelectronics |
| Infineon Technologies |
STMicroelectronics and Infineon Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Infineon Technologies
The main advantage of trading using opposite STMicroelectronics and Infineon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Infineon Technologies 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 Infineon Technologies will offset losses from the drop in Infineon Technologies' long position.| STMicroelectronics vs. Silicon Laboratories | STMicroelectronics vs. Power Integrations | STMicroelectronics vs. Diodes Incorporated | STMicroelectronics vs. MaxLinear |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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