Correlation Between GEN Restaurant and STMicroelectronics

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

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

Diversification Opportunities for GEN Restaurant and STMicroelectronics

0.29

Correlation Coefficient

GEN Restaurant  STMicroelectronics

Modest diversification

The 3 months correlation between GEN and STMicroelectronics is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding GEN Restaurant Group, and STMicroelectronics NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics NV ADR and GEN Restaurant 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 GEN Restaurant Group, 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 NV ADR has no effect on the direction of GEN Restaurant i.e., GEN Restaurant and STMicroelectronics go up and down completely randomly.

Pair Corralation between GEN Restaurant and STMicroelectronics

Given the investment horizon of 90 days GEN Restaurant Group, is expected to generate 22.5 times more return on investment than STMicroelectronics. However, GEN Restaurant is 22.5 times more volatile than STMicroelectronics NV ADR. It trades about 0.05 of its potential returns per unit of risk. STMicroelectronics NV ADR is currently generating about -0.02 per unit of risk. If you would invest  0.00  in GEN Restaurant Group, on September 26, 2024 and sell it today you would earn a total of  747.00  from holding GEN Restaurant Group, or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.21%
Values	Daily Returns

GEN Restaurant Group,  vs.  STMicroelectronics NV ADR

GEN Restaurant Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEN Restaurant Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, GEN Restaurant is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

STMicroelectronics NV ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMicroelectronics NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with GEN Restaurant and STMicroelectronics

The main advantage of trading using opposite GEN Restaurant and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEN Restaurant 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 GEN Restaurant Group, and STMicroelectronics NV ADR 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 Stocks Directory module to find actively traded stocks across global markets.