Correlation Between STMICROELECTRONICS and ESSILORLUXOTTICA

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

By analyzing existing cross correlation between STMICROELECTRONICS and ESSILORLUXOTTICA 12ON, you can compare the effects of market volatilities on STMICROELECTRONICS and ESSILORLUXOTTICA 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 ESSILORLUXOTTICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMICROELECTRONICS and ESSILORLUXOTTICA.

Diversification Opportunities for STMICROELECTRONICS and ESSILORLUXOTTICA

-0.58

Correlation Coefficient

STMICROELECTRONICS  ESSILORLUXOTTICA

Excellent diversification

The 3 months correlation between STMICROELECTRONICS and ESSILORLUXOTTICA is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and ESSILORLUXOTTICA 12ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSILORLUXOTTICA 12ON 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 ESSILORLUXOTTICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSILORLUXOTTICA 12ON has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and ESSILORLUXOTTICA go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and ESSILORLUXOTTICA

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to under-perform the ESSILORLUXOTTICA. In addition to that, STMICROELECTRONICS is 2.09 times more volatile than ESSILORLUXOTTICA 12ON. It trades about -0.04 of its total potential returns per unit of risk. ESSILORLUXOTTICA 12ON is currently generating about 0.19 per unit of volatility. If you would invest  10,900  in ESSILORLUXOTTICA 12ON on October 24, 2024 and sell it today you would earn a total of  1,300  from holding ESSILORLUXOTTICA 12ON or generate 11.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

STMICROELECTRONICS  vs.  ESSILORLUXOTTICA 12ON

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.

ESSILORLUXOTTICA 12ON

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESSILORLUXOTTICA 12ON are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, ESSILORLUXOTTICA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with STMICROELECTRONICS and ESSILORLUXOTTICA

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

The idea behind STMICROELECTRONICS and ESSILORLUXOTTICA 12ON 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.