Correlation Between STMICROELECTRONICS and Delta Electronics

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

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

Diversification Opportunities for STMICROELECTRONICS and Delta Electronics

0.1

Correlation Coefficient

STMICROELECTRONICS  Delta Electronics

Average diversification

The 3 months correlation between STMICROELECTRONICS and Delta is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and Delta Electronics Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Electronics Public 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 Delta Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Electronics Public has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and Delta Electronics go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and Delta Electronics

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to generate 0.49 times more return on investment than Delta Electronics. However, STMICROELECTRONICS is 2.05 times less risky than Delta Electronics. It trades about -0.03 of its potential returns per unit of risk. Delta Electronics Public is currently generating about -0.19 per unit of risk. If you would invest  2,394  in STMICROELECTRONICS on December 26, 2024 and sell it today you would lose (157.00) from holding STMICROELECTRONICS or give up 6.56% of portfolio value over 90 days.

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

STMICROELECTRONICS  vs.  Delta Electronics Public

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

Delta Electronics Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Electronics Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with STMICROELECTRONICS and Delta Electronics

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

The idea behind STMICROELECTRONICS and Delta Electronics Public 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..