Correlation Between STMicroelectronics and Citizens Financial
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Citizens Financial 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 Citizens Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Citizens Financial Group,, you can compare the effects of market volatilities on STMicroelectronics and Citizens Financial 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 Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Citizens Financial.
Diversification Opportunities for STMicroelectronics and Citizens Financial
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMicroelectronics and Citizens is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Citizens Financial Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Group, 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 Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial Group, has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Citizens Financial go up and down completely randomly.
Pair Corralation between STMicroelectronics and Citizens Financial
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Citizens Financial. In addition to that, STMicroelectronics is 1.02 times more volatile than Citizens Financial Group,. It trades about -0.04 of its total potential returns per unit of risk. Citizens Financial Group, is currently generating about 0.04 per unit of volatility. If you would invest 20,726 in Citizens Financial Group, on October 30, 2024 and sell it today you would earn a total of 7,290 from holding Citizens Financial Group, or generate 35.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 77.14% |
| Values | Daily Returns |
STMicroelectronics NV vs. Citizens Financial Group,
Performance |
| Timeline |
| STMicroelectronics |
| Citizens Financial Group, |
STMicroelectronics and Citizens Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Citizens Financial
The main advantage of trading using opposite STMicroelectronics and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Citizens Financial 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 Citizens Financial will offset losses from the drop in Citizens Financial's long position.| STMicroelectronics vs. CVS Health | STMicroelectronics vs. Applied Materials, | STMicroelectronics vs. The Trade Desk | STMicroelectronics vs. Charter Communications |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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