Correlation Between STMicroelectronics and Ion Beam

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

By analyzing existing cross correlation between STMicroelectronics NV and Ion Beam Applications, you can compare the effects of market volatilities on STMicroelectronics and Ion Beam 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 Ion Beam. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Ion Beam.

Diversification Opportunities for STMicroelectronics and Ion Beam

0.36

Correlation Coefficient

STMicroelectronics  Ion Beam

Weak diversification

The 3 months correlation between STMicroelectronics and Ion is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Ion Beam Applications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ion Beam Applications 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 Ion Beam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ion Beam Applications has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Ion Beam go up and down completely randomly.

Pair Corralation between STMicroelectronics and Ion Beam

Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Ion Beam. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.09 times less risky than Ion Beam. The stock trades about -0.03 of its potential returns per unit of risk. The Ion Beam Applications is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,615  in Ion Beam Applications on September 30, 2024 and sell it today you would lose (280.00) from holding Ion Beam Applications or give up 17.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

STMicroelectronics NV  vs.  Ion Beam Applications

STMicroelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMicroelectronics NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Ion Beam Applications

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with STMicroelectronics and Ion Beam

The main advantage of trading using opposite STMicroelectronics and Ion Beam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Ion Beam 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 Ion Beam will offset losses from the drop in Ion Beam's long position.

The idea behind STMicroelectronics NV and Ion Beam Applications 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.