Correlation Between Iron Mountain and STMicroelectronics

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

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

Diversification Opportunities for Iron Mountain and STMicroelectronics

0.21

Correlation Coefficient

Iron Mountain  STMicroelectronics

Modest diversification

The 3 months correlation between Iron and STMicroelectronics is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Iron Mountain Incorporated and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Iron Mountain 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 Iron Mountain Incorporated 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 Iron Mountain i.e., Iron Mountain and STMicroelectronics go up and down completely randomly.

Pair Corralation between Iron Mountain and STMicroelectronics

Assuming the 90 days trading horizon Iron Mountain Incorporated is expected to under-perform the STMicroelectronics. In addition to that, Iron Mountain is 1.31 times more volatile than STMicroelectronics NV. It trades about -0.44 of its total potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.15 per unit of volatility. If you would invest  15,739  in STMicroelectronics NV on October 1, 2024 and sell it today you would lose (589.00) from holding STMicroelectronics NV or give up 3.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Iron Mountain Incorporated  vs.  STMicroelectronics NV

Iron Mountain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Mountain Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iron Mountain is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 somewhat strong primary indicators, STMicroelectronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Iron Mountain and STMicroelectronics

The main advantage of trading using opposite Iron Mountain and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Mountain 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 Iron Mountain Incorporated 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.