Correlation Between STMicroelectronics and Les Hotels
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Les Hotels 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 Les Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Les Hotels Bav, you can compare the effects of market volatilities on STMicroelectronics and Les Hotels 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 Les Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Les Hotels.
Diversification Opportunities for STMicroelectronics and Les Hotels
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between STMicroelectronics and Les is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Les Hotels Bav in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Les Hotels Bav 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 Les Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Les Hotels Bav has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Les Hotels go up and down completely randomly.
Pair Corralation between STMicroelectronics and Les Hotels
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Les Hotels. In addition to that, STMicroelectronics is 5.18 times more volatile than Les Hotels Bav. It trades about -0.13 of its total potential returns per unit of risk. Les Hotels Bav is currently generating about -0.07 per unit of volatility. If you would invest 7,250 in Les Hotels Bav on August 29, 2024 and sell it today you would lose (50.00) from holding Les Hotels Bav or give up 0.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Les Hotels Bav
Performance |
| Timeline |
| STMicroelectronics |
| Les Hotels Bav |
STMicroelectronics and Les Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Les Hotels
The main advantage of trading using opposite STMicroelectronics and Les Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Les Hotels 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 Les Hotels will offset losses from the drop in Les Hotels' long position.| STMicroelectronics vs. LVMH Mot Hennessy | STMicroelectronics vs. LOreal SA | STMicroelectronics vs. Hermes International SCA | STMicroelectronics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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