Correlation Between Patria Investments and STMicroelectronics

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

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

Diversification Opportunities for Patria Investments and STMicroelectronics

-0.02

Correlation Coefficient

Patria Investments  STMicroelectronics

Good diversification

The 3 months correlation between Patria and STMicroelectronics is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Patria Investments Limited and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Patria Investments 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 Patria Investments 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 Patria Investments i.e., Patria Investments and STMicroelectronics go up and down completely randomly.

Pair Corralation between Patria Investments and STMicroelectronics

Assuming the 90 days trading horizon Patria Investments Limited is expected to generate 0.58 times more return on investment than STMicroelectronics. However, Patria Investments Limited is 1.72 times less risky than STMicroelectronics. It trades about 0.02 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.05 per unit of risk. If you would invest  3,417  in Patria Investments Limited on October 8, 2024 and sell it today you would earn a total of  171.00  from holding Patria Investments Limited or generate 5.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.62%
Values	Daily Returns

Patria Investments Limited  vs.  STMicroelectronics NV

Patria Investments

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Patria Investments sustained 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 somewhat strong primary indicators, STMicroelectronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Patria Investments and STMicroelectronics

The main advantage of trading using opposite Patria Investments and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patria Investments 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 Patria Investments 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.

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.