Correlation Between STMicroelectronics and Entech SE
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Entech SE 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 Entech SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Entech SE SAS, you can compare the effects of market volatilities on STMicroelectronics and Entech SE 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 Entech SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Entech SE.
Diversification Opportunities for STMicroelectronics and Entech SE
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STMicroelectronics and Entech is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Entech SE SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entech SE SAS 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 Entech SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entech SE SAS has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Entech SE go up and down completely randomly.
Pair Corralation between STMicroelectronics and Entech SE
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Entech SE. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.84 times less risky than Entech SE. The stock trades about -0.12 of its potential returns per unit of risk. The Entech SE SAS is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 658.00 in Entech SE SAS on September 1, 2024 and sell it today you would lose (181.00) from holding Entech SE SAS or give up 27.51% 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. Entech SE SAS
Performance |
| Timeline |
| STMicroelectronics |
| Entech SE SAS |
STMicroelectronics and Entech SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Entech SE
The main advantage of trading using opposite STMicroelectronics and Entech SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Entech SE 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 Entech SE will offset losses from the drop in Entech SE's long position.| STMicroelectronics vs. Hotelim Socit Anonyme | STMicroelectronics vs. Sogeclair SA | STMicroelectronics vs. Axway Software | STMicroelectronics vs. Sidetrade |
| Entech SE vs. Afyren SAS | Entech SE vs. Voltalia SA | Entech SE vs. Waga Energy SA | Entech SE vs. Haffner Energy 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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