Correlation Between STMICROELECTRONICS and CENTR Brands

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

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

Diversification Opportunities for STMICROELECTRONICS and CENTR Brands

-0.14

Correlation Coefficient

STMICROELECTRONICS  CENTR Brands

Good diversification

The 3 months correlation between STMICROELECTRONICS and CENTR is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and CENTR Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CENTR Brands Corp 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 CENTR Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CENTR Brands Corp has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and CENTR Brands go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and CENTR Brands

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to under-perform the CENTR Brands. But the stock apears to be less risky and, when comparing its historical volatility, STMICROELECTRONICS is 169.85 times less risky than CENTR Brands. The stock trades about -0.03 of its potential returns per unit of risk. The CENTR Brands Corp is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  2.00  in CENTR Brands Corp on October 10, 2024 and sell it today you would earn a total of  3.06  from holding CENTR Brands Corp or generate 153.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

STMICROELECTRONICS  vs.  CENTR Brands Corp

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.

CENTR Brands Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CENTR Brands Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CENTR Brands reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMICROELECTRONICS and CENTR Brands

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

The idea behind STMICROELECTRONICS and CENTR Brands Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.