Correlation Between STMicroelectronics and Aedas Homes

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

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

Diversification Opportunities for STMicroelectronics and Aedas Homes

-0.33

Correlation Coefficient

STMicroelectronics  Aedas Homes

Very good diversification

The 3 months correlation between STMicroelectronics and Aedas is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Aedas Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SA 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 NV are associated (or correlated) with Aedas Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedas Homes SA has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Aedas Homes go up and down completely randomly.

Pair Corralation between STMicroelectronics and Aedas Homes

Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Aedas Homes. In addition to that, STMicroelectronics is 1.44 times more volatile than Aedas Homes SA. It trades about -0.03 of its total potential returns per unit of risk. Aedas Homes SA is currently generating about 0.06 per unit of volatility. If you would invest  2,500  in Aedas Homes SA on December 26, 2024 and sell it today you would earn a total of  165.00  from holding Aedas Homes SA or generate 6.6% return on investment over 90 days.

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

STMicroelectronics NV  vs.  Aedas Homes SA

STMicroelectronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days STMicroelectronics NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, STMicroelectronics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Aedas Homes SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Aedas Homes may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with STMicroelectronics and Aedas Homes

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

The idea behind STMicroelectronics NV and Aedas Homes SA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.