Correlation Between STMicroelectronics and Diagnostic Medical
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Diagnostic Medical 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 Diagnostic Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Diagnostic Medical Systems, you can compare the effects of market volatilities on STMicroelectronics and Diagnostic Medical 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 Diagnostic Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Diagnostic Medical.
Diversification Opportunities for STMicroelectronics and Diagnostic Medical
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between STMicroelectronics and Diagnostic is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Diagnostic Medical Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diagnostic Medical 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 Diagnostic Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diagnostic Medical has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Diagnostic Medical go up and down completely randomly.
Pair Corralation between STMicroelectronics and Diagnostic Medical
Assuming the 90 days trading horizon STMicroelectronics NV is expected to generate 0.57 times more return on investment than Diagnostic Medical. However, STMicroelectronics NV is 1.76 times less risky than Diagnostic Medical. It trades about -0.21 of its potential returns per unit of risk. Diagnostic Medical Systems is currently generating about -0.18 per unit of risk. If you would invest 2,604 in STMicroelectronics NV on August 25, 2024 and sell it today you would lose (264.00) from holding STMicroelectronics NV or give up 10.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Diagnostic Medical Systems
Performance |
| Timeline |
| STMicroelectronics |
| Diagnostic Medical |
STMicroelectronics and Diagnostic Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Diagnostic Medical
The main advantage of trading using opposite STMicroelectronics and Diagnostic Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Diagnostic Medical 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 Diagnostic Medical will offset losses from the drop in Diagnostic Medical's long position.| STMicroelectronics vs. LVMH Mot Hennessy | STMicroelectronics vs. LOreal SA | STMicroelectronics vs. Hermes International SCA | STMicroelectronics vs. Manitou BF SA |
| Diagnostic Medical vs. Virbac SA | Diagnostic Medical vs. Boiron SA | Diagnostic Medical vs. Bonduelle SCA | Diagnostic Medical vs. LNA Sante SA |
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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