Correlation Between KRISPY KREME and STMICROELECTRONICS

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

By analyzing existing cross correlation between KRISPY KREME DL 01 and STMICROELECTRONICS, you can compare the effects of market volatilities on KRISPY KREME 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 KRISPY KREME with a short position of STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRISPY KREME and STMICROELECTRONICS.

Diversification Opportunities for KRISPY KREME and STMICROELECTRONICS

-0.01

Correlation Coefficient

KRISPY KREME  STMICROELECTRONICS

Good diversification

The 3 months correlation between KRISPY and STMICROELECTRONICS is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding KRISPY KREME DL 01 and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS and KRISPY KREME 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 KRISPY KREME DL 01 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 KRISPY KREME i.e., KRISPY KREME and STMICROELECTRONICS go up and down completely randomly.

Pair Corralation between KRISPY KREME and STMICROELECTRONICS

Assuming the 90 days horizon KRISPY KREME DL 01 is expected to under-perform the STMICROELECTRONICS. But the stock apears to be less risky and, when comparing its historical volatility, KRISPY KREME DL 01 is 1.55 times less risky than STMICROELECTRONICS. The stock trades about -0.64 of its potential returns per unit of risk. The STMICROELECTRONICS is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  2,435  in STMICROELECTRONICS on September 27, 2024 and sell it today you would lose (72.00) from holding STMICROELECTRONICS or give up 2.96% of portfolio value over 90 days.

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

KRISPY KREME DL 01  vs.  STMICROELECTRONICS

KRISPY KREME DL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KRISPY KREME DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, KRISPY KREME is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 latest uncertain performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with KRISPY KREME and STMICROELECTRONICS

The main advantage of trading using opposite KRISPY KREME and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KRISPY KREME 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 KRISPY KREME DL 01 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.