Correlation Between STMICROELECTRONICS and Hua Hong

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

By analyzing existing cross correlation between STMICROELECTRONICS and Hua Hong Semiconductor, you can compare the effects of market volatilities on STMICROELECTRONICS and Hua Hong 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 Hua Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMICROELECTRONICS and Hua Hong.

Diversification Opportunities for STMICROELECTRONICS and Hua Hong

0.35

Correlation Coefficient

STMICROELECTRONICS  Hua Hong

Weak diversification

The 3 months correlation between STMICROELECTRONICS and Hua is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and Hua Hong Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Hong Semiconductor 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 Hua Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Hong Semiconductor has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and Hua Hong go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and Hua Hong

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to under-perform the Hua Hong. But the stock apears to be less risky and, when comparing its historical volatility, STMICROELECTRONICS is 1.7 times less risky than Hua Hong. The stock trades about -0.02 of its potential returns per unit of risk. The Hua Hong Semiconductor is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  345.00  in Hua Hong Semiconductor on October 11, 2024 and sell it today you would lose (95.00) from holding Hua Hong Semiconductor or give up 27.54% of portfolio value over 90 days.

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

STMICROELECTRONICS  vs.  Hua Hong Semiconductor

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

Hua Hong Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hua Hong Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Pair Trading with STMICROELECTRONICS and Hua Hong

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

The idea behind STMICROELECTRONICS and Hua Hong Semiconductor 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.