Correlation Between STMicroelectronics and IRON ROAD

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

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

Diversification Opportunities for STMicroelectronics and IRON ROAD

0.0

Correlation Coefficient

STMicroelectronics  IRON ROAD

Pay attention - limited upside

The 3 months correlation between STMicroelectronics and IRON is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and IRON ROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IRON ROAD 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 IRON ROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IRON ROAD has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and IRON ROAD go up and down completely randomly.

Pair Corralation between STMicroelectronics and IRON ROAD

If you would invest  2,393  in STMicroelectronics NV on September 28, 2024 and sell it today you would earn a total of  22.00  from holding STMicroelectronics NV or generate 0.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

STMicroelectronics NV  vs.  IRON ROAD

STMicroelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMicroelectronics NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

IRON ROAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IRON ROAD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IRON ROAD is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with STMicroelectronics and IRON ROAD

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

The idea behind STMicroelectronics NV and IRON ROAD 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.

Check out your portfolio center.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.