Correlation Between STMicroelectronics and Cleanaway Waste

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

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

Diversification Opportunities for STMicroelectronics and Cleanaway Waste

0.06

Correlation Coefficient

STMicroelectronics  Cleanaway Waste

Significant diversification

The 3 months correlation between STMicroelectronics and Cleanaway is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Cleanaway Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleanaway Waste Mana 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 Cleanaway Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleanaway Waste Mana has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Cleanaway Waste go up and down completely randomly.

Pair Corralation between STMicroelectronics and Cleanaway Waste

Assuming the 90 days horizon STMicroelectronics NV is expected to generate 0.93 times more return on investment than Cleanaway Waste. However, STMicroelectronics NV is 1.07 times less risky than Cleanaway Waste. It trades about 0.02 of its potential returns per unit of risk. Cleanaway Waste Management is currently generating about -0.06 per unit of risk. If you would invest  2,558  in STMicroelectronics NV on October 10, 2024 and sell it today you would earn a total of  18.00  from holding STMicroelectronics NV or generate 0.7% return on investment over 90 days.

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

STMicroelectronics NV  vs.  Cleanaway Waste Management

STMicroelectronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Cleanaway Waste Mana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cleanaway Waste Management 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 Cleanaway Waste

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

The idea behind STMicroelectronics NV and Cleanaway Waste Management 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.