Correlation Between Prosiebensat and STMicroelectronics

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

By analyzing existing cross correlation between Prosiebensat 1 Media and STMicroelectronics NV, you can compare the effects of market volatilities on Prosiebensat 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 Prosiebensat with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosiebensat and STMicroelectronics.

Diversification Opportunities for Prosiebensat and STMicroelectronics

-0.33

Correlation Coefficient

Prosiebensat  STMicroelectronics

Very good diversification

The 3 months correlation between Prosiebensat and STMicroelectronics is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Prosiebensat 1 Media and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Prosiebensat 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 Prosiebensat 1 Media 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 Prosiebensat i.e., Prosiebensat and STMicroelectronics go up and down completely randomly.

Pair Corralation between Prosiebensat and STMicroelectronics

Assuming the 90 days trading horizon Prosiebensat 1 Media is expected to generate 0.98 times more return on investment than STMicroelectronics. However, Prosiebensat 1 Media is 1.02 times less risky than STMicroelectronics. It trades about 0.09 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.05 per unit of risk. If you would invest  504.00  in Prosiebensat 1 Media on December 30, 2024 and sell it today you would earn a total of  76.00  from holding Prosiebensat 1 Media or generate 15.08% return on investment over 90 days.

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

Prosiebensat 1 Media  vs.  STMicroelectronics NV

Prosiebensat 1 Media

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prosiebensat 1 Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Prosiebensat unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Prosiebensat and STMicroelectronics

The main advantage of trading using opposite Prosiebensat and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosiebensat 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 Prosiebensat 1 Media 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.