Correlation Between STMicroelectronics and Invibes Advertising
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Invibes Advertising 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 Invibes Advertising into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Invibes Advertising NV, you can compare the effects of market volatilities on STMicroelectronics and Invibes Advertising 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 Invibes Advertising. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Invibes Advertising.
Diversification Opportunities for STMicroelectronics and Invibes Advertising
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STMicroelectronics and Invibes is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Invibes Advertising NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invibes Advertising 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 Invibes Advertising. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invibes Advertising has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Invibes Advertising go up and down completely randomly.
Pair Corralation between STMicroelectronics and Invibes Advertising
Assuming the 90 days trading horizon STMicroelectronics NV is expected to generate 0.58 times more return on investment than Invibes Advertising. However, STMicroelectronics NV is 1.72 times less risky than Invibes Advertising. It trades about -0.12 of its potential returns per unit of risk. Invibes Advertising NV is currently generating about -0.1 per unit of risk. If you would invest 4,209 in STMicroelectronics NV on September 1, 2024 and sell it today you would lose (1,782) from holding STMicroelectronics NV or give up 42.34% 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. Invibes Advertising NV
Performance |
| Timeline |
| STMicroelectronics |
| Invibes Advertising |
STMicroelectronics and Invibes Advertising Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Invibes Advertising
The main advantage of trading using opposite STMicroelectronics and Invibes Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Invibes Advertising 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 Invibes Advertising will offset losses from the drop in Invibes Advertising's long position.| STMicroelectronics vs. Hotelim Socit Anonyme | STMicroelectronics vs. Sogeclair SA | STMicroelectronics vs. Axway Software | STMicroelectronics vs. Sidetrade |
| Invibes Advertising vs. Nacon Sa | Invibes Advertising vs. Grolleau SAS | Invibes Advertising vs. Trigano SA | Invibes Advertising vs. Manitou BF 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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