Correlation Between Marks and STMicroelectronics

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

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

Diversification Opportunities for Marks and STMicroelectronics

0.0

Correlation Coefficient

Marks  STMicroelectronics

Pay attention - limited upside

The 3 months correlation between Marks and STMicroelectronics is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Marks and Spencer and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Marks 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 Marks and Spencer 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 Marks i.e., Marks and STMicroelectronics go up and down completely randomly.

Pair Corralation between Marks and STMicroelectronics

Assuming the 90 days trading horizon Marks and Spencer is expected to generate 0.73 times more return on investment than STMicroelectronics. However, Marks and Spencer is 1.36 times less risky than STMicroelectronics. It trades about 0.03 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.05 per unit of risk. If you would invest  36,744  in Marks and Spencer on October 2, 2024 and sell it today you would earn a total of  806.00  from holding Marks and Spencer or generate 2.19% return on investment over 90 days.

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

Marks and Spencer  vs.  STMicroelectronics NV

Marks and Spencer

Risk-Adjusted Performance

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Weak

Over the last 90 days Marks and Spencer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Marks is not utilizing all of its potentials. The current 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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Marks and STMicroelectronics

The main advantage of trading using opposite Marks and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marks 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 Marks and Spencer 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 Transaction History module to view history of all your transactions and understand their impact on performance.