Correlation Between STMICROELECTRONICS and KOOL2PLAY

Can any of the company-specific risk be diversified away by investing in both STMICROELECTRONICS and KOOL2PLAY 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 KOOL2PLAY into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between STMICROELECTRONICS and KOOL2PLAY SA ZY, you can compare the effects of market volatilities on STMICROELECTRONICS and KOOL2PLAY 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 KOOL2PLAY. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMICROELECTRONICS and KOOL2PLAY.

Diversification Opportunities for STMICROELECTRONICS and KOOL2PLAY

0.52

Correlation Coefficient

STMICROELECTRONICS  KOOL2PLAY

Very weak diversification

The 3 months correlation between STMICROELECTRONICS and KOOL2PLAY is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and KOOL2PLAY SA ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KOOL2PLAY SA ZY 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 KOOL2PLAY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KOOL2PLAY SA ZY has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and KOOL2PLAY go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and KOOL2PLAY

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to generate 2.67 times less return on investment than KOOL2PLAY. But when comparing it to its historical volatility, STMICROELECTRONICS is 3.26 times less risky than KOOL2PLAY. It trades about 0.1 of its potential returns per unit of risk. KOOL2PLAY SA ZY is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  15.00  in KOOL2PLAY SA ZY on October 24, 2024 and sell it today you would earn a total of  1.00  from holding KOOL2PLAY SA ZY or generate 6.67% return on investment over 90 days.

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

STMICROELECTRONICS  vs.  KOOL2PLAY SA ZY

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

KOOL2PLAY SA ZY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KOOL2PLAY SA ZY 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.

Pair Trading with STMICROELECTRONICS and KOOL2PLAY

The main advantage of trading using opposite STMICROELECTRONICS and KOOL2PLAY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMICROELECTRONICS position performs unexpectedly, KOOL2PLAY 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 KOOL2PLAY will offset losses from the drop in KOOL2PLAY's long position.

The idea behind STMICROELECTRONICS and KOOL2PLAY SA ZY 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.