Correlation Between STMicroelectronics and Hisense Home

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

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

Diversification Opportunities for STMicroelectronics and Hisense Home

-0.09

Correlation Coefficient

STMicroelectronics  Hisense Home

Good diversification

The 3 months correlation between STMicroelectronics and Hisense is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Hisense Home Appliances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hisense Home Appliances 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 Hisense Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hisense Home Appliances has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Hisense Home go up and down completely randomly.

Pair Corralation between STMicroelectronics and Hisense Home

Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Hisense Home. In addition to that, STMicroelectronics is 1.17 times more volatile than Hisense Home Appliances. It trades about -0.03 of its total potential returns per unit of risk. Hisense Home Appliances is currently generating about 0.07 per unit of volatility. If you would invest  300.00  in Hisense Home Appliances on December 26, 2024 and sell it today you would earn a total of  27.00  from holding Hisense Home Appliances or generate 9.0% 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.  Hisense Home Appliances

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.

Hisense Home Appliances

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hisense Home Appliances are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hisense Home may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with STMicroelectronics and Hisense Home

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

The idea behind STMicroelectronics NV and Hisense Home Appliances 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.