Correlation Between STMICROELECTRONICS and DATATEC

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

By analyzing existing cross correlation between STMICROELECTRONICS and DATATEC LTD 2, you can compare the effects of market volatilities on STMICROELECTRONICS and DATATEC 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 DATATEC. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMICROELECTRONICS and DATATEC.

Diversification Opportunities for STMICROELECTRONICS and DATATEC

-0.25

Correlation Coefficient

STMICROELECTRONICS  DATATEC

Very good diversification

The 3 months correlation between STMICROELECTRONICS and DATATEC is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and DATATEC LTD 2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATATEC LTD 2 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 DATATEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATATEC LTD 2 has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and DATATEC go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and DATATEC

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to under-perform the DATATEC. In addition to that, STMICROELECTRONICS is 1.41 times more volatile than DATATEC LTD 2. It trades about -0.06 of its total potential returns per unit of risk. DATATEC LTD 2 is currently generating about 0.1 per unit of volatility. If you would invest  460.00  in DATATEC LTD 2 on December 28, 2024 and sell it today you would earn a total of  55.00  from holding DATATEC LTD 2 or generate 11.96% return on investment over 90 days.

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

STMICROELECTRONICS  vs.  DATATEC LTD 2

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 latest fragile performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

DATATEC LTD 2

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DATATEC LTD 2 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, DATATEC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMICROELECTRONICS and DATATEC

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

The idea behind STMICROELECTRONICS and DATATEC LTD 2 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.