Correlation Between STMicroelectronics and Hansa Investment

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

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

Diversification Opportunities for STMicroelectronics and Hansa Investment

0.12

Correlation Coefficient

STMicroelectronics  Hansa Investment

Average diversification

The 3 months correlation between STMicroelectronics and Hansa is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Hansa Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hansa Investment 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 Hansa Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hansa Investment has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Hansa Investment go up and down completely randomly.

Pair Corralation between STMicroelectronics and Hansa Investment

Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Hansa Investment. In addition to that, STMicroelectronics is 1.65 times more volatile than Hansa Investment. It trades about -0.12 of its total potential returns per unit of risk. Hansa Investment is currently generating about 0.04 per unit of volatility. If you would invest  21,598  in Hansa Investment on October 22, 2024 and sell it today you would earn a total of  1,502  from holding Hansa Investment or generate 6.95% return on investment over 90 days.

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

STMicroelectronics NV  vs.  Hansa Investment

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 comparatively stable basic indicators, STMicroelectronics is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Hansa Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hansa Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Hansa Investment 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 Hansa Investment

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

The idea behind STMicroelectronics NV and Hansa Investment 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 Stocks Directory module to find actively traded stocks across global markets.