Correlation Between STMicroelectronics and Prosiebensat

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

By analyzing existing cross correlation between STMicroelectronics NV and Prosiebensat 1 Media, you can compare the effects of market volatilities on STMicroelectronics and Prosiebensat 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 Prosiebensat. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Prosiebensat.

Diversification Opportunities for STMicroelectronics and Prosiebensat

0.75

Correlation Coefficient

STMicroelectronics  Prosiebensat

Poor diversification

The 3 months correlation between STMicroelectronics and Prosiebensat is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Prosiebensat 1 Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosiebensat 1 Media 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 Prosiebensat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosiebensat 1 Media has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Prosiebensat go up and down completely randomly.

Pair Corralation between STMicroelectronics and Prosiebensat

Assuming the 90 days horizon STMicroelectronics NV is expected to generate 0.93 times more return on investment than Prosiebensat. However, STMicroelectronics NV is 1.07 times less risky than Prosiebensat. It trades about -0.25 of its potential returns per unit of risk. Prosiebensat 1 Media is currently generating about -0.26 per unit of risk. If you would invest  2,541  in STMicroelectronics NV on October 9, 2024 and sell it today you would lose (184.00) from holding STMicroelectronics NV or give up 7.24% of portfolio value over 90 days.

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

STMicroelectronics NV  vs.  Prosiebensat 1 Media

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 uncertain 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.

Prosiebensat 1 Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosiebensat 1 Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with STMicroelectronics and Prosiebensat

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

The idea behind STMicroelectronics NV and Prosiebensat 1 Media 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.