Correlation Between Reckitt Benckiser and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Reckitt Benckiser 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 Reckitt Benckiser and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reckitt Benckiser Group and STMicroelectronics NV, you can compare the effects of market volatilities on Reckitt Benckiser 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 Reckitt Benckiser with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reckitt Benckiser and STMicroelectronics.
Diversification Opportunities for Reckitt Benckiser and STMicroelectronics
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Reckitt and STMicroelectronics is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Reckitt Benckiser Group and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Reckitt Benckiser 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 Reckitt Benckiser Group 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 Reckitt Benckiser i.e., Reckitt Benckiser and STMicroelectronics go up and down completely randomly.
Pair Corralation between Reckitt Benckiser and STMicroelectronics
Assuming the 90 days trading horizon Reckitt Benckiser Group is expected to generate 0.61 times more return on investment than STMicroelectronics. However, Reckitt Benckiser Group is 1.63 times less risky than STMicroelectronics. It trades about 0.04 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.01 per unit of risk. If you would invest 456,300 in Reckitt Benckiser Group on September 12, 2024 and sell it today you would earn a total of 14,000 from holding Reckitt Benckiser Group or generate 3.07% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Reckitt Benckiser Group vs. STMicroelectronics NV
Performance |
Timeline |
Reckitt Benckiser |
STMicroelectronics |
Reckitt Benckiser and STMicroelectronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Reckitt Benckiser and STMicroelectronics
The main advantage of trading using opposite Reckitt Benckiser and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reckitt Benckiser 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.Reckitt Benckiser vs. Fortune Brands Home | Reckitt Benckiser vs. Neometals | Reckitt Benckiser vs. McEwen Mining | Reckitt Benckiser vs. Zurich Insurance Group |
STMicroelectronics vs. Gamma Communications PLC | STMicroelectronics vs. Panther Metals PLC | STMicroelectronics vs. Batm Advanced Communications | STMicroelectronics vs. Anglesey Mining |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
Money Managers Screen money managers from public funds and ETFs managed around the world | |
Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
Economic Indicators Top statistical indicators that provide insights into how an economy is performing |