Correlation Between Infrastrutture Wireless and STMicroelectronics

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

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

Diversification Opportunities for Infrastrutture Wireless and STMicroelectronics

0.67

Correlation Coefficient

Infrastrutture Wireless  STMicroelectronics

Poor diversification

The 3 months correlation between Infrastrutture and STMicroelectronics is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Infrastrutture Wireless Italia and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Infrastrutture Wireless 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 Infrastrutture Wireless Italiane 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 Infrastrutture Wireless i.e., Infrastrutture Wireless and STMicroelectronics go up and down completely randomly.

Pair Corralation between Infrastrutture Wireless and STMicroelectronics

Assuming the 90 days trading horizon Infrastrutture Wireless Italiane is expected to under-perform the STMicroelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Infrastrutture Wireless Italiane is 1.75 times less risky than STMicroelectronics. The stock trades about -0.08 of its potential returns per unit of risk. The STMicroelectronics NV is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,616  in STMicroelectronics NV on October 27, 2024 and sell it today you would lose (175.00) from holding STMicroelectronics NV or give up 6.69% of portfolio value over 90 days.

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

Infrastrutture Wireless Italia  vs.  STMicroelectronics NV

Infrastrutture Wireless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infrastrutture Wireless Italiane has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Infrastrutture Wireless is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Infrastrutture Wireless and STMicroelectronics

The main advantage of trading using opposite Infrastrutture Wireless and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infrastrutture Wireless 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 Infrastrutture Wireless Italiane 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.