Correlation Between Tower Semiconductor and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Tower Semiconductor 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 Tower Semiconductor and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tower Semiconductor and STMicroelectronics NV ADR, you can compare the effects of market volatilities on Tower Semiconductor 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 Tower Semiconductor with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Semiconductor and STMicroelectronics.
Diversification Opportunities for Tower Semiconductor and STMicroelectronics
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Tower and STMicroelectronics is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and STMicroelectronics NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics NV ADR and Tower Semiconductor 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 Tower Semiconductor 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 NV ADR has no effect on the direction of Tower Semiconductor i.e., Tower Semiconductor and STMicroelectronics go up and down completely randomly.
Pair Corralation between Tower Semiconductor and STMicroelectronics
Given the investment horizon of 90 days Tower Semiconductor is expected to generate 1.9 times more return on investment than STMicroelectronics. However, Tower Semiconductor is 1.9 times more volatile than STMicroelectronics NV ADR. It trades about 0.08 of its potential returns per unit of risk. STMicroelectronics NV ADR is currently generating about -0.04 per unit of risk. If you would invest 4,664 in Tower Semiconductor on September 12, 2024 and sell it today you would earn a total of 236.00 from holding Tower Semiconductor or generate 5.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tower Semiconductor vs. STMicroelectronics NV ADR
Performance |
| Timeline |
| Tower Semiconductor |
| STMicroelectronics NV ADR |
Tower Semiconductor and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tower Semiconductor and STMicroelectronics
The main advantage of trading using opposite Tower Semiconductor and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Semiconductor 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.| Tower Semiconductor vs. NVIDIA | Tower Semiconductor vs. Taiwan Semiconductor Manufacturing | Tower Semiconductor vs. Micron Technology | Tower Semiconductor vs. Qualcomm Incorporated |
| STMicroelectronics vs. NXP Semiconductors NV | STMicroelectronics vs. Analog Devices | STMicroelectronics vs. ON Semiconductor | STMicroelectronics vs. Lattice Semiconductor |
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 CEOs Directory module to screen CEOs from public companies around the world.
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