Correlation Between Manitou BF and STMicroelectronics

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

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

Diversification Opportunities for Manitou BF and STMicroelectronics

0.66

Correlation Coefficient

Manitou BF  STMicroelectronics

Poor diversification

The 3 months correlation between Manitou and STMicroelectronics is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Manitou BF SA and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Manitou BF 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 Manitou BF SA 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 Manitou BF i.e., Manitou BF and STMicroelectronics go up and down completely randomly.

Pair Corralation between Manitou BF and STMicroelectronics

Assuming the 90 days trading horizon Manitou BF SA is expected to under-perform the STMicroelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Manitou BF SA is 1.23 times less risky than STMicroelectronics. The stock trades about -0.3 of its potential returns per unit of risk. The STMicroelectronics NV is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,411  in STMicroelectronics NV on September 5, 2024 and sell it today you would earn a total of  31.00  from holding STMicroelectronics NV or generate 1.29% return on investment over 90 days.

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

Manitou BF SA  vs.  STMicroelectronics NV

Manitou BF SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manitou BF SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Manitou BF and STMicroelectronics

The main advantage of trading using opposite Manitou BF and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manitou BF 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 Manitou BF SA 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.