Correlation Between STMicroelectronics and Thor Mining

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

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

Diversification Opportunities for STMicroelectronics and Thor Mining

0.11

Correlation Coefficient

STMicroelectronics  Thor Mining

Average diversification

The 3 months correlation between STMicroelectronics and Thor is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Thor Mining PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Mining PLC 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 Thor Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Mining PLC has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Thor Mining go up and down completely randomly.

Pair Corralation between STMicroelectronics and Thor Mining

Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Thor Mining. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.7 times less risky than Thor Mining. The stock trades about -0.09 of its potential returns per unit of risk. The Thor Mining PLC is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  85.00  in Thor Mining PLC on October 9, 2024 and sell it today you would lose (15.00) from holding Thor Mining PLC or give up 17.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

STMicroelectronics NV  vs.  Thor Mining PLC

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.

Thor Mining PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thor Mining PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Thor Mining is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with STMicroelectronics and Thor Mining

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

The idea behind STMicroelectronics NV and Thor Mining PLC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.