Correlation Between Regions Financial and STMICROELECTRONICS

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

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

Diversification Opportunities for Regions Financial and STMICROELECTRONICS

-0.08

Correlation Coefficient

Regions Financial  STMICROELECTRONICS

Good diversification

The 3 months correlation between Regions and STMICROELECTRONICS is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS and Regions Financial 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 Regions Financial 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 Regions Financial i.e., Regions Financial and STMICROELECTRONICS go up and down completely randomly.

Pair Corralation between Regions Financial and STMICROELECTRONICS

Assuming the 90 days horizon Regions Financial is expected to under-perform the STMICROELECTRONICS. But the stock apears to be less risky and, when comparing its historical volatility, Regions Financial is 1.84 times less risky than STMICROELECTRONICS. The stock trades about -0.13 of its potential returns per unit of risk. The STMICROELECTRONICS is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,371  in STMICROELECTRONICS on December 2, 2024 and sell it today you would lose (35.00) from holding STMICROELECTRONICS or give up 1.48% of portfolio value over 90 days.

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

Regions Financial  vs.  STMICROELECTRONICS

Regions Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regions Financial 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.

STMICROELECTRONICS

Risk-Adjusted Performance

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Regions Financial and STMICROELECTRONICS

The main advantage of trading using opposite Regions Financial and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regions Financial 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 Regions Financial 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.