Correlation Between STMicroelectronics and Infosys
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Infosys 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 Infosys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Infosys Limited, you can compare the effects of market volatilities on STMicroelectronics and Infosys 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 Infosys. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Infosys.
Diversification Opportunities for STMicroelectronics and Infosys
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMicroelectronics and Infosys is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Infosys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Limited 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 Infosys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infosys Limited has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Infosys go up and down completely randomly.
Pair Corralation between STMicroelectronics and Infosys
Assuming the 90 days trading horizon STMicroelectronics is expected to generate 3.14 times less return on investment than Infosys. In addition to that, STMicroelectronics is 1.55 times more volatile than Infosys Limited. It trades about 0.08 of its total potential returns per unit of risk. Infosys Limited is currently generating about 0.38 per unit of volatility. If you would invest 6,372 in Infosys Limited on September 12, 2024 and sell it today you would earn a total of 712.00 from holding Infosys Limited or generate 11.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Infosys Limited
Performance |
| Timeline |
| STMicroelectronics |
| Infosys Limited |
STMicroelectronics and Infosys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Infosys
The main advantage of trading using opposite STMicroelectronics and Infosys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Infosys 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 Infosys will offset losses from the drop in Infosys' long position.| STMicroelectronics vs. Nordon Indstrias Metalrgicas | STMicroelectronics vs. MAHLE Metal Leve | STMicroelectronics vs. Raytheon Technologies | STMicroelectronics vs. Lupatech SA |
| Infosys vs. Monster Beverage | Infosys vs. United Airlines Holdings | Infosys vs. Unity Software | Infosys vs. NXP Semiconductors 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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