Correlation Between CENTR Brands and STMICROELECTRONICS

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

By analyzing existing cross correlation between CENTR Brands Corp and STMICROELECTRONICS, you can compare the effects of market volatilities on CENTR Brands 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 CENTR Brands with a short position of STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of CENTR Brands and STMICROELECTRONICS.

Diversification Opportunities for CENTR Brands and STMICROELECTRONICS

-0.14

Correlation Coefficient

CENTR Brands  STMICROELECTRONICS

Good diversification

The 3 months correlation between CENTR and STMICROELECTRONICS is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding CENTR Brands Corp and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS and CENTR Brands 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 CENTR Brands Corp 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 CENTR Brands i.e., CENTR Brands and STMICROELECTRONICS go up and down completely randomly.

Pair Corralation between CENTR Brands and STMICROELECTRONICS

Assuming the 90 days horizon CENTR Brands Corp is expected to generate 169.85 times more return on investment than STMICROELECTRONICS. However, CENTR Brands is 169.85 times more volatile than STMICROELECTRONICS. It trades about 0.31 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.03 per unit of risk. If you would invest  2.00  in CENTR Brands Corp on October 10, 2024 and sell it today you would earn a total of  3.06  from holding CENTR Brands Corp or generate 153.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

CENTR Brands Corp  vs.  STMICROELECTRONICS

CENTR Brands Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CENTR Brands Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CENTR Brands reported solid returns over the last few months and may actually be approaching a breakup point.

STMICROELECTRONICS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CENTR Brands and STMICROELECTRONICS

The main advantage of trading using opposite CENTR Brands and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CENTR Brands 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's long position.

The idea behind CENTR Brands Corp and STMICROELECTRONICS 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.