Correlation Between Gaztransport Technigaz and STMicroelectronics

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

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

Diversification Opportunities for Gaztransport Technigaz and STMicroelectronics

-0.03

Correlation Coefficient

Gaztransport Technigaz  STMicroelectronics

Good diversification

The 3 months correlation between Gaztransport and STMicroelectronics is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Gaztransport Technigaz SAS and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Gaztransport Technigaz 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 Gaztransport Technigaz SAS 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 Gaztransport Technigaz i.e., Gaztransport Technigaz and STMicroelectronics go up and down completely randomly.

Pair Corralation between Gaztransport Technigaz and STMicroelectronics

Assuming the 90 days trading horizon Gaztransport Technigaz SAS is expected to generate 0.86 times more return on investment than STMicroelectronics. However, Gaztransport Technigaz SAS is 1.16 times less risky than STMicroelectronics. It trades about 0.07 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.06 per unit of risk. If you would invest  12,930  in Gaztransport Technigaz SAS on December 30, 2024 and sell it today you would earn a total of  1,260  from holding Gaztransport Technigaz SAS or generate 9.74% return on investment over 90 days.

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

Gaztransport Technigaz SAS  vs.  STMicroelectronics NV

Gaztransport Technigaz

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport Technigaz SAS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gaztransport Technigaz may actually be approaching a critical reversion point that can send shares even higher in April 2025.

STMicroelectronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days STMicroelectronics NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Gaztransport Technigaz and STMicroelectronics

The main advantage of trading using opposite Gaztransport Technigaz and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gaztransport Technigaz 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 Gaztransport Technigaz SAS 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.