Correlation Between Cellnex Telecom and STMicroelectronics

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

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

Diversification Opportunities for Cellnex Telecom and STMicroelectronics

0.68

Correlation Coefficient

Cellnex Telecom  STMicroelectronics

Poor diversification

The 3 months correlation between Cellnex and STMicroelectronics is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cellnex Telecom SA and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Cellnex Telecom 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 Cellnex Telecom SA 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 Cellnex Telecom i.e., Cellnex Telecom and STMicroelectronics go up and down completely randomly.

Pair Corralation between Cellnex Telecom and STMicroelectronics

Assuming the 90 days trading horizon Cellnex Telecom SA is expected to under-perform the STMicroelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Cellnex Telecom SA is 1.31 times less risky than STMicroelectronics. The stock trades about -0.11 of its potential returns per unit of risk. The STMicroelectronics NV is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,417  in STMicroelectronics NV on October 6, 2024 and sell it today you would lose (68.00) from holding STMicroelectronics NV or give up 2.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Cellnex Telecom SA  vs.  STMicroelectronics NV

Cellnex Telecom SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cellnex Telecom SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm 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 latest weak 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 Cellnex Telecom and STMicroelectronics

The main advantage of trading using opposite Cellnex Telecom and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cellnex Telecom 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 Cellnex Telecom SA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .