Correlation Between STMicroelectronics and United States
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and United States 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 United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and United States Steel, you can compare the effects of market volatilities on STMicroelectronics and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and United States.
Diversification Opportunities for STMicroelectronics and United States
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between STMicroelectronics and United is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and United States go up and down completely randomly.
Pair Corralation between STMicroelectronics and United States
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the United States. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 2.88 times less risky than United States. The stock trades about -0.27 of its potential returns per unit of risk. The United States Steel is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 20,002 in United States Steel on October 17, 2024 and sell it today you would earn a total of 1,698 from holding United States Steel or generate 8.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. United States Steel
Performance |
| Timeline |
| STMicroelectronics |
| United States Steel |
STMicroelectronics and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and United States
The main advantage of trading using opposite STMicroelectronics and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.| STMicroelectronics vs. Zoom Video Communications | STMicroelectronics vs. Prudential Financial | STMicroelectronics vs. Take Two Interactive Software | STMicroelectronics vs. United Natural Foods, |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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