Correlation Between STMicroelectronics and Morgan Advanced

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

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

Diversification Opportunities for STMicroelectronics and Morgan Advanced

0.38

Correlation Coefficient

STMicroelectronics  Morgan Advanced

Weak diversification

The 3 months correlation between STMicroelectronics and Morgan is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Morgan Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Advanced Materials 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 Morgan Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Advanced Materials has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Morgan Advanced go up and down completely randomly.

Pair Corralation between STMicroelectronics and Morgan Advanced

Assuming the 90 days trading horizon STMicroelectronics NV is expected to generate 1.61 times more return on investment than Morgan Advanced. However, STMicroelectronics is 1.61 times more volatile than Morgan Advanced Materials. It trades about -0.05 of its potential returns per unit of risk. Morgan Advanced Materials is currently generating about -0.11 per unit of risk. If you would invest  2,657  in STMicroelectronics NV on September 5, 2024 and sell it today you would lose (224.00) from holding STMicroelectronics NV or give up 8.43% of portfolio value over 90 days.

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

STMicroelectronics NV  vs.  Morgan Advanced Materials

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 uncertain 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.

Morgan Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Pair Trading with STMicroelectronics and Morgan Advanced

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

The idea behind STMicroelectronics NV and Morgan Advanced Materials 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.