Correlation Between STMICROELECTRONICS and Corporate Travel

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

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

Diversification Opportunities for STMICROELECTRONICS and Corporate Travel

-0.53

Correlation Coefficient

STMICROELECTRONICS  Corporate Travel

Excellent diversification

The 3 months correlation between STMICROELECTRONICS and Corporate is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and Corporate Travel Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporate Travel Man and STMICROELECTRONICS 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 STMICROELECTRONICS are associated (or correlated) with Corporate Travel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporate Travel Man has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and Corporate Travel go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and Corporate Travel

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to generate 5.23 times less return on investment than Corporate Travel. In addition to that, STMICROELECTRONICS is 1.09 times more volatile than Corporate Travel Management. It trades about 0.06 of its total potential returns per unit of risk. Corporate Travel Management is currently generating about 0.34 per unit of volatility. If you would invest  770.00  in Corporate Travel Management on October 26, 2024 and sell it today you would earn a total of  100.00  from holding Corporate Travel Management or generate 12.99% return on investment over 90 days.

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

STMICROELECTRONICS  vs.  Corporate Travel Management

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.

Corporate Travel Man

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Travel Management are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Corporate Travel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMICROELECTRONICS and Corporate Travel

The main advantage of trading using opposite STMICROELECTRONICS and Corporate Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMICROELECTRONICS position performs unexpectedly, Corporate Travel 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 Corporate Travel will offset losses from the drop in Corporate Travel's long position.

The idea behind STMICROELECTRONICS and Corporate Travel Management 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.