Correlation Between Ams AG and STMicroelectronics

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

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

Diversification Opportunities for Ams AG and STMicroelectronics

0.83

Correlation Coefficient

Ams AG  STMicroelectronics

Very poor diversification

The 3 months correlation between Ams and STMicroelectronics is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ams AG and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Ams AG 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 ams AG 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 Ams AG i.e., Ams AG and STMicroelectronics go up and down completely randomly.

Pair Corralation between Ams AG and STMicroelectronics

Assuming the 90 days horizon ams AG is expected to generate 84.95 times more return on investment than STMicroelectronics. However, Ams AG is 84.95 times more volatile than STMicroelectronics NV. It trades about 0.28 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.01 per unit of risk. If you would invest  3,721  in ams AG on September 24, 2024 and sell it today you would lose (3,363) from holding ams AG or give up 90.38% of portfolio value over 90 days.

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

ams AG  vs.  STMicroelectronics NV

ams AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ams AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company 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. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ams AG and STMicroelectronics

The main advantage of trading using opposite Ams AG and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ams AG 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 ams AG 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.