Correlation Between STMicroelectronics and BANK CENTRAL

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

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

Diversification Opportunities for STMicroelectronics and BANK CENTRAL

0.67

Correlation Coefficient

STMicroelectronics  BANK CENTRAL

Poor diversification

The 3 months correlation between STMicroelectronics and BANK is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and BANK CENTRAL ASIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK CENTRAL ASIA 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 BANK CENTRAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK CENTRAL ASIA has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and BANK CENTRAL go up and down completely randomly.

Pair Corralation between STMicroelectronics and BANK CENTRAL

Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the BANK CENTRAL. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.07 times less risky than BANK CENTRAL. The stock trades about -0.25 of its potential returns per unit of risk. The BANK CENTRAL ASIA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  59.00  in BANK CENTRAL ASIA on October 9, 2024 and sell it today you would earn a total of  0.00  from holding BANK CENTRAL ASIA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.12%
Values	Daily Returns

STMicroelectronics NV  vs.  BANK CENTRAL ASIA

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 unsteady 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.

BANK CENTRAL ASIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK CENTRAL ASIA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with STMicroelectronics and BANK CENTRAL

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

The idea behind STMicroelectronics NV and BANK CENTRAL ASIA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.