Correlation Between STMicroelectronics and Duke Energy
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Duke Energy 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 Duke Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Duke Energy, you can compare the effects of market volatilities on STMicroelectronics and Duke Energy 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 Duke Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Duke Energy.
Diversification Opportunities for STMicroelectronics and Duke Energy
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMicroelectronics and Duke is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Duke Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy 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 Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Duke Energy go up and down completely randomly.
Pair Corralation between STMicroelectronics and Duke Energy
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Duke Energy. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.29 times less risky than Duke Energy. The stock trades about -0.18 of its potential returns per unit of risk. The Duke Energy is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 65,949 in Duke Energy on September 2, 2024 and sell it today you would earn a total of 4,700 from holding Duke Energy or generate 7.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Duke Energy
Performance |
| Timeline |
| STMicroelectronics |
| Duke Energy |
STMicroelectronics and Duke Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Duke Energy
The main advantage of trading using opposite STMicroelectronics and Duke Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Duke Energy 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 Duke Energy will offset losses from the drop in Duke Energy's long position.| STMicroelectronics vs. Zoom Video Communications | STMicroelectronics vs. Apartment Investment and | STMicroelectronics vs. Charter Communications | STMicroelectronics vs. Telecomunicaes Brasileiras SA |
| Duke Energy vs. Capital One Financial | Duke Energy vs. Autohome | Duke Energy vs. Waste Management | Duke Energy vs. STMicroelectronics NV |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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