Correlation Between STMicroelectronics and Automatic Data
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Automatic Data 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 Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Automatic Data Processing, you can compare the effects of market volatilities on STMicroelectronics and Automatic Data 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 Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Automatic Data.
Diversification Opportunities for STMicroelectronics and Automatic Data
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMicroelectronics and Automatic is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Automatic Data go up and down completely randomly.
Pair Corralation between STMicroelectronics and Automatic Data
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Automatic Data. In addition to that, STMicroelectronics is 1.28 times more volatile than Automatic Data Processing. It trades about -0.01 of its total potential returns per unit of risk. Automatic Data Processing is currently generating about 0.05 per unit of volatility. If you would invest 5,844 in Automatic Data Processing on September 5, 2024 and sell it today you would earn a total of 1,852 from holding Automatic Data Processing or generate 31.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.96% |
| Values | Daily Returns |
STMicroelectronics NV vs. Automatic Data Processing
Performance |
| Timeline |
| STMicroelectronics |
| Automatic Data Processing |
STMicroelectronics and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Automatic Data
The main advantage of trading using opposite STMicroelectronics and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.| STMicroelectronics vs. Automatic Data Processing | STMicroelectronics vs. Take Two Interactive Software | STMicroelectronics vs. Prudential Financial | STMicroelectronics vs. Global X Funds |
| Automatic Data vs. Fundo Investimento Imobiliario | Automatic Data vs. Fras le SA | Automatic Data vs. Western Digital | Automatic Data vs. Clave Indices De |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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