Correlation Between STMICROELECTRONICS and Becton Dickinson

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

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

Diversification Opportunities for STMICROELECTRONICS and Becton Dickinson

-0.38

Correlation Coefficient

STMICROELECTRONICS  Becton Dickinson

Very good diversification

The 3 months correlation between STMICROELECTRONICS and Becton is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and Becton Dickinson and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Becton Dickinson 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 Becton Dickinson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Becton Dickinson has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and Becton Dickinson go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and Becton Dickinson

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to generate 5.56 times less return on investment than Becton Dickinson. In addition to that, STMICROELECTRONICS is 2.03 times more volatile than Becton Dickinson and. It trades about 0.0 of its total potential returns per unit of risk. Becton Dickinson and is currently generating about 0.04 per unit of volatility. If you would invest  21,115  in Becton Dickinson and on December 2, 2024 and sell it today you would earn a total of  645.00  from holding Becton Dickinson and or generate 3.05% return on investment over 90 days.

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

STMICROELECTRONICS  vs.  Becton Dickinson and

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.

Becton Dickinson

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Becton Dickinson and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Becton Dickinson is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with STMICROELECTRONICS and Becton Dickinson

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

The idea behind STMICROELECTRONICS and Becton Dickinson and 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..