Correlation Between STMICROELECTRONICS and Science Applications

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

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

Diversification Opportunities for STMICROELECTRONICS and Science Applications

0.43

Correlation Coefficient

STMICROELECTRONICS  Science Applications

Very weak diversification

The 3 months correlation between STMICROELECTRONICS and Science is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and Science Applications Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Applications 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 Science Applications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Applications has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and Science Applications go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and Science Applications

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to generate 1.18 times more return on investment than Science Applications. However, STMICROELECTRONICS is 1.18 times more volatile than Science Applications International. It trades about 0.01 of its potential returns per unit of risk. Science Applications International is currently generating about -0.16 per unit of risk. If you would invest  2,336  in STMICROELECTRONICS on November 20, 2024 and sell it today you would lose (17.00) from holding STMICROELECTRONICS or give up 0.73% of portfolio value over 90 days.

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

STMICROELECTRONICS  vs.  Science Applications Internati

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.

Science Applications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with STMICROELECTRONICS and Science Applications

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

The idea behind STMICROELECTRONICS and Science Applications International 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.