Correlation Between MAGNUM MINING and STMicroelectronics

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

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

Diversification Opportunities for MAGNUM MINING and STMicroelectronics

0.16

Correlation Coefficient

MAGNUM MINING  STMicroelectronics

Average diversification

The 3 months correlation between MAGNUM and STMicroelectronics is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding MAGNUM MINING EXP and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and MAGNUM MINING 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 MAGNUM MINING EXP 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 MAGNUM MINING i.e., MAGNUM MINING and STMicroelectronics go up and down completely randomly.

Pair Corralation between MAGNUM MINING and STMicroelectronics

Assuming the 90 days trading horizon MAGNUM MINING EXP is expected to under-perform the STMicroelectronics. In addition to that, MAGNUM MINING is 1.11 times more volatile than STMicroelectronics NV. It trades about -0.13 of its total potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.03 per unit of volatility. If you would invest  2,411  in STMicroelectronics NV on December 26, 2024 and sell it today you would lose (181.00) from holding STMicroelectronics NV or give up 7.51% of portfolio value over 90 days.

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

MAGNUM MINING EXP  vs.  STMicroelectronics NV

MAGNUM MINING EXP

Risk-Adjusted Performance

Very Weak

Over the last 90 days MAGNUM MINING EXP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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. Despite nearly stable basic indicators, STMicroelectronics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MAGNUM MINING and STMicroelectronics

The main advantage of trading using opposite MAGNUM MINING and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGNUM MINING 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 MAGNUM MINING EXP 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.