Correlation Between STMicroelectronics and Chiba Bank

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

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

Diversification Opportunities for STMicroelectronics and Chiba Bank

-0.33

Correlation Coefficient

STMicroelectronics  Chiba Bank

Very good diversification

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

Pair Corralation between STMicroelectronics and Chiba Bank

Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Chiba Bank. In addition to that, STMicroelectronics is 1.26 times more volatile than Chiba Bank. It trades about -0.01 of its total potential returns per unit of risk. Chiba Bank is currently generating about 0.12 per unit of volatility. If you would invest  680.00  in Chiba Bank on October 22, 2024 and sell it today you would earn a total of  90.00  from holding Chiba Bank or generate 13.24% 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.  Chiba Bank

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 nearly stable basic indicators, STMicroelectronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Chiba Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chiba Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Chiba Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and Chiba Bank

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

The idea behind STMicroelectronics NV and Chiba Bank 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.