Correlation Between Quaker Chemical and STMICROELECTRONICS

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

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

Diversification Opportunities for Quaker Chemical and STMICROELECTRONICS

-0.16

Correlation Coefficient

Quaker Chemical  STMICROELECTRONICS

Good diversification

The 3 months correlation between Quaker and STMICROELECTRONICS is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS and Quaker Chemical 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 Quaker Chemical 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 Quaker Chemical i.e., Quaker Chemical and STMICROELECTRONICS go up and down completely randomly.

Pair Corralation between Quaker Chemical and STMICROELECTRONICS

Assuming the 90 days horizon Quaker Chemical is expected to generate 0.95 times more return on investment than STMICROELECTRONICS. However, Quaker Chemical is 1.06 times less risky than STMICROELECTRONICS. It trades about -0.01 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.03 per unit of risk. If you would invest  17,068  in Quaker Chemical on October 4, 2024 and sell it today you would lose (3,768) from holding Quaker Chemical or give up 22.08% of portfolio value over 90 days.

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

Quaker Chemical  vs.  STMICROELECTRONICS

Quaker Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Quaker Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

STMICROELECTRONICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMICROELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, STMICROELECTRONICS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Quaker Chemical and STMICROELECTRONICS

The main advantage of trading using opposite Quaker Chemical and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quaker Chemical 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's long position.

The idea behind Quaker Chemical and STMICROELECTRONICS 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.