Correlation Between Systemair and STMicroelectronics

Can any of the company-specific risk be diversified away by investing in both Systemair 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 Systemair and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Systemair AB and STMicroelectronics NV, you can compare the effects of market volatilities on Systemair 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 Systemair with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Systemair and STMicroelectronics.

Diversification Opportunities for Systemair and STMicroelectronics

-0.37

Correlation Coefficient

Systemair  STMicroelectronics

Very good diversification

The 3 months correlation between Systemair and STMicroelectronics is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Systemair AB and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Systemair 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 Systemair AB 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 Systemair i.e., Systemair and STMicroelectronics go up and down completely randomly.

Pair Corralation between Systemair and STMicroelectronics

Assuming the 90 days trading horizon Systemair AB is expected to generate 0.76 times more return on investment than STMicroelectronics. However, Systemair AB is 1.31 times less risky than STMicroelectronics. It trades about -0.21 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.21 per unit of risk. If you would invest  9,460  in Systemair AB on October 8, 2024 and sell it today you would lose (510.00) from holding Systemair AB or give up 5.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Systemair AB  vs.  STMicroelectronics NV

Systemair AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Systemair AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Systemair is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

STMicroelectronics

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, STMicroelectronics is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Systemair and STMicroelectronics

The main advantage of trading using opposite Systemair and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Systemair 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.

The idea behind Systemair AB and STMicroelectronics NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..