Correlation Between Hilton Food and STMicroelectronics

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

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

Diversification Opportunities for Hilton Food and STMicroelectronics

-0.36

Correlation Coefficient

Hilton Food  STMicroelectronics

Very good diversification

The 3 months correlation between Hilton and STMicroelectronics is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Food Group and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Hilton Food 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 Hilton Food 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 has no effect on the direction of Hilton Food i.e., Hilton Food and STMicroelectronics go up and down completely randomly.

Pair Corralation between Hilton Food and STMicroelectronics

Assuming the 90 days trading horizon Hilton Food Group is expected to generate 0.57 times more return on investment than STMicroelectronics. However, Hilton Food Group is 1.76 times less risky than STMicroelectronics. It trades about 0.07 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.0 per unit of risk. If you would invest  87,768  in Hilton Food Group on September 12, 2024 and sell it today you would earn a total of  4,632  from holding Hilton Food Group or generate 5.28% return on investment over 90 days.

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

Hilton Food Group  vs.  STMicroelectronics NV

Hilton Food Group

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Food Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Hilton Food is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. In spite of comparatively stable basic indicators, STMicroelectronics is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hilton Food and STMicroelectronics

The main advantage of trading using opposite Hilton Food and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilton Food 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 Hilton Food Group 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.