Correlation Between STMicroelectronics and Broadpeak
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Broadpeak 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 Broadpeak into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Broadpeak SA, you can compare the effects of market volatilities on STMicroelectronics and Broadpeak 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 Broadpeak. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Broadpeak.
Diversification Opportunities for STMicroelectronics and Broadpeak
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STMicroelectronics and Broadpeak is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Broadpeak SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadpeak SA 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 Broadpeak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadpeak SA has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Broadpeak go up and down completely randomly.
Pair Corralation between STMicroelectronics and Broadpeak
Assuming the 90 days trading horizon STMicroelectronics NV is expected to generate 0.8 times more return on investment than Broadpeak. However, STMicroelectronics NV is 1.25 times less risky than Broadpeak. It trades about -0.03 of its potential returns per unit of risk. Broadpeak SA is currently generating about -0.12 per unit of risk. If you would invest 3,611 in STMicroelectronics NV on August 26, 2024 and sell it today you would lose (1,271) from holding STMicroelectronics NV or give up 35.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Broadpeak SA
Performance |
| Timeline |
| STMicroelectronics |
| Broadpeak SA |
STMicroelectronics and Broadpeak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Broadpeak
The main advantage of trading using opposite STMicroelectronics and Broadpeak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Broadpeak 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 Broadpeak will offset losses from the drop in Broadpeak's long position.| STMicroelectronics vs. LVMH Mot Hennessy | STMicroelectronics vs. LOreal SA | STMicroelectronics vs. Hermes International SCA | STMicroelectronics vs. Manitou BF SA |
| Broadpeak vs. Piscines Desjoyaux SA | Broadpeak vs. Groupe Guillin SA | Broadpeak vs. Passat Socit Anonyme | Broadpeak vs. Grard Perrier Industrie |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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