Correlation Between Sovereign Metals and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Sovereign Metals and STMicroelectronics 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 Sovereign Metals and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sovereign Metals and STMicroelectronics NV, you can compare the effects of market volatilities on Sovereign Metals and STMicroelectronics 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 Sovereign Metals with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sovereign Metals and STMicroelectronics.
Diversification Opportunities for Sovereign Metals and STMicroelectronics
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sovereign and STMicroelectronics is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sovereign Metals and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Sovereign Metals 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 Sovereign Metals are associated (or correlated) with STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Sovereign Metals i.e., Sovereign Metals and STMicroelectronics go up and down completely randomly.
Pair Corralation between Sovereign Metals and STMicroelectronics
Assuming the 90 days trading horizon Sovereign Metals is expected to generate 0.89 times more return on investment than STMicroelectronics. However, Sovereign Metals is 1.13 times less risky than STMicroelectronics. It trades about 0.13 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.03 per unit of risk. If you would invest 3,850 in Sovereign Metals on September 4, 2024 and sell it today you would earn a total of 200.00 from holding Sovereign Metals or generate 5.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sovereign Metals vs. STMicroelectronics NV
Performance |
| Timeline |
| Sovereign Metals |
| STMicroelectronics |
Sovereign Metals and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sovereign Metals and STMicroelectronics
The main advantage of trading using opposite Sovereign Metals and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sovereign Metals position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| Sovereign Metals vs. Antofagasta PLC | Sovereign Metals vs. Atalaya Mining | Sovereign Metals vs. Ferrexpo PLC | Sovereign Metals vs. Amaroq Minerals |
| STMicroelectronics vs. Sovereign Metals | STMicroelectronics vs. GreenX Metals | STMicroelectronics vs. Fulcrum Metals PLC | STMicroelectronics vs. Zurich Insurance Group |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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