Correlation Between STMicroelectronics and Wenzhou Kangning

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

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

Diversification Opportunities for STMicroelectronics and Wenzhou Kangning

0.18

Correlation Coefficient

STMicroelectronics  Wenzhou Kangning

Average diversification

The 3 months correlation between STMicroelectronics and Wenzhou is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Wenzhou Kangning Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wenzhou Kangning Hospital 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 Wenzhou Kangning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wenzhou Kangning Hospital has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Wenzhou Kangning go up and down completely randomly.

Pair Corralation between STMicroelectronics and Wenzhou Kangning

Assuming the 90 days horizon STMicroelectronics NV is expected to generate 1.15 times more return on investment than Wenzhou Kangning. However, STMicroelectronics is 1.15 times more volatile than Wenzhou Kangning Hospital. It trades about -0.04 of its potential returns per unit of risk. Wenzhou Kangning Hospital is currently generating about -0.24 per unit of risk. If you would invest  2,412  in STMicroelectronics NV on December 28, 2024 and sell it today you would lose (224.00) from holding STMicroelectronics NV or give up 9.29% of portfolio value over 90 days.

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

STMicroelectronics NV  vs.  Wenzhou Kangning Hospital

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 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.

Wenzhou Kangning Hospital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wenzhou Kangning Hospital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with STMicroelectronics and Wenzhou Kangning

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

The idea behind STMicroelectronics NV and Wenzhou Kangning Hospital 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.