Correlation Between STMicroelectronics and Renesas Electronics
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Renesas Electronics 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 Renesas Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Renesas Electronics, you can compare the effects of market volatilities on STMicroelectronics and Renesas Electronics 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 Renesas Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Renesas Electronics.
Diversification Opportunities for STMicroelectronics and Renesas Electronics
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STMicroelectronics and Renesas is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics 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 Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Renesas Electronics go up and down completely randomly.
Pair Corralation between STMicroelectronics and Renesas Electronics
Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Renesas Electronics. But the pink sheet apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.27 times less risky than Renesas Electronics. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Renesas Electronics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 945.00 in Renesas Electronics on August 25, 2024 and sell it today you would earn a total of 350.00 from holding Renesas Electronics or generate 37.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Renesas Electronics
Performance |
| Timeline |
| STMicroelectronics |
| Renesas Electronics |
STMicroelectronics and Renesas Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Renesas Electronics
The main advantage of trading using opposite STMicroelectronics and Renesas Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Renesas Electronics 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 Renesas Electronics will offset losses from the drop in Renesas Electronics' long position.| STMicroelectronics vs. Silicon Laboratories | STMicroelectronics vs. Power Integrations | STMicroelectronics vs. Diodes Incorporated | STMicroelectronics vs. MaxLinear |
| Renesas Electronics vs. NVIDIA | Renesas Electronics vs. Intel | Renesas Electronics vs. Taiwan Semiconductor Manufacturing | Renesas Electronics vs. Marvell Technology Group |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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