Correlation Between STMicroelectronics and Telkom SA

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

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

Diversification Opportunities for STMicroelectronics and Telkom SA

-0.11

Correlation Coefficient

STMicroelectronics  Telkom SA

Good diversification

The 3 months correlation between STMicroelectronics and Telkom is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Telkom SA SOC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom SA SOC 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 Telkom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom SA SOC has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Telkom SA go up and down completely randomly.

Pair Corralation between STMicroelectronics and Telkom SA

Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Telkom SA. In addition to that, STMicroelectronics is 1.16 times more volatile than Telkom SA SOC. It trades about -0.03 of its total potential returns per unit of risk. Telkom SA SOC is currently generating about 0.08 per unit of volatility. If you would invest  165.00  in Telkom SA SOC on December 26, 2024 and sell it today you would earn a total of  18.00  from holding Telkom SA SOC or generate 10.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

STMicroelectronics NV  vs.  Telkom SA SOC

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.

Telkom SA SOC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom SA SOC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Telkom SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and Telkom SA

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

The idea behind STMicroelectronics NV and Telkom SA SOC 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.