Correlation Between Japan Asia and STMICROELECTRONICS

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

By analyzing existing cross correlation between Japan Asia Investment and STMICROELECTRONICS, you can compare the effects of market volatilities on Japan Asia 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 Japan Asia with a short position of STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Asia and STMICROELECTRONICS.

Diversification Opportunities for Japan Asia and STMICROELECTRONICS

-0.21

Correlation Coefficient

Japan Asia  STMICROELECTRONICS

Very good diversification

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

Pair Corralation between Japan Asia and STMICROELECTRONICS

Assuming the 90 days horizon Japan Asia Investment is expected to under-perform the STMICROELECTRONICS. But the stock apears to be less risky and, when comparing its historical volatility, Japan Asia Investment is 1.71 times less risky than STMICROELECTRONICS. The stock trades about -0.19 of its potential returns per unit of risk. The STMICROELECTRONICS is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,325  in STMICROELECTRONICS on September 22, 2024 and sell it today you would earn a total of  19.00  from holding STMICROELECTRONICS or generate 0.82% return on investment over 90 days.

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

Japan Asia Investment  vs.  STMICROELECTRONICS

Japan Asia Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Asia Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Japan Asia is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

STMICROELECTRONICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMICROELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, STMICROELECTRONICS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Japan Asia and STMICROELECTRONICS

The main advantage of trading using opposite Japan Asia and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Asia 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's long position.

The idea behind Japan Asia Investment and STMICROELECTRONICS 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.