Correlation Between STMicroelectronics and Phillips
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Phillips 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 Phillips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Phillips 66, you can compare the effects of market volatilities on STMicroelectronics and Phillips 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 Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Phillips.
Diversification Opportunities for STMicroelectronics and Phillips
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between STMicroelectronics and Phillips is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 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 Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Phillips go up and down completely randomly.
Pair Corralation between STMicroelectronics and Phillips
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Phillips. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.04 times less risky than Phillips. The stock trades about -0.03 of its potential returns per unit of risk. The Phillips 66 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 26,800 in Phillips 66 on October 11, 2024 and sell it today you would earn a total of 8,585 from holding Phillips 66 or generate 32.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 86.77% |
| Values | Daily Returns |
STMicroelectronics NV vs. Phillips 66
Performance |
| Timeline |
| STMicroelectronics |
| Phillips 66 |
STMicroelectronics and Phillips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Phillips
The main advantage of trading using opposite STMicroelectronics and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Phillips 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 Phillips will offset losses from the drop in Phillips' long position.| STMicroelectronics vs. Check Point Software | STMicroelectronics vs. salesforce inc | STMicroelectronics vs. United Airlines Holdings | STMicroelectronics vs. Spotify Technology SA |
| Phillips vs. Marfrig Global Foods | Phillips vs. STMicroelectronics NV | Phillips vs. Fresenius Medical Care | Phillips vs. DXC Technology |
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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