Correlation Between Quantum EMotion and STMicroelectronics

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

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

Diversification Opportunities for Quantum EMotion and STMicroelectronics

0.19

Correlation Coefficient

Quantum EMotion  STMicroelectronics

Average diversification

The 3 months correlation between Quantum and STMicroelectronics is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Quantum eMotion and STMicroelectronics NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics NV ADR and Quantum EMotion 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 Quantum eMotion 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 NV ADR has no effect on the direction of Quantum EMotion i.e., Quantum EMotion and STMicroelectronics go up and down completely randomly.

Pair Corralation between Quantum EMotion and STMicroelectronics

Assuming the 90 days horizon Quantum eMotion is expected to generate 5.22 times more return on investment than STMicroelectronics. However, Quantum EMotion is 5.22 times more volatile than STMicroelectronics NV ADR. It trades about 0.03 of its potential returns per unit of risk. STMicroelectronics NV ADR is currently generating about -0.01 per unit of risk. If you would invest  70.00  in Quantum eMotion on December 25, 2024 and sell it today you would lose (23.00) from holding Quantum eMotion or give up 32.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Quantum eMotion  vs.  STMicroelectronics NV ADR

Quantum eMotion

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Quantum eMotion are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Quantum EMotion reported solid returns over the last few months and may actually be approaching a breakup point.

STMicroelectronics NV ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days STMicroelectronics NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, STMicroelectronics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Quantum EMotion and STMicroelectronics

The main advantage of trading using opposite Quantum EMotion and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantum EMotion 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 Quantum eMotion and STMicroelectronics NV ADR 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.