Correlation Between Intchains Group and STMicroelectronics

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

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

Diversification Opportunities for Intchains Group and STMicroelectronics

0.21

Correlation Coefficient

Intchains Group  STMicroelectronics

Modest diversification

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

Pair Corralation between Intchains Group and STMicroelectronics

Considering the 90-day investment horizon Intchains Group Limited is expected to generate 6.24 times more return on investment than STMicroelectronics. However, Intchains Group is 6.24 times more volatile than STMicroelectronics NV. It trades about 0.19 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.02 per unit of risk. If you would invest  431.00  in Intchains Group Limited on September 24, 2024 and sell it today you would earn a total of  300.00  from holding Intchains Group Limited or generate 69.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Intchains Group Limited  vs.  STMicroelectronics NV

Intchains Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intchains Group Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, Intchains Group reported solid returns over the last few months and may actually be approaching a breakup point.

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 Intchains Group and STMicroelectronics

The main advantage of trading using opposite Intchains Group and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intchains Group 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 Intchains Group Limited 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.