Correlation Between STMicroelectronics and UNIQA Insurance

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

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

Diversification Opportunities for STMicroelectronics and UNIQA Insurance

-0.07

Correlation Coefficient

STMicroelectronics  UNIQA Insurance

Good diversification

The 3 months correlation between STMicroelectronics and UNIQA is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and UNIQA Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIQA Insurance Group 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 UNIQA Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIQA Insurance Group has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and UNIQA Insurance go up and down completely randomly.

Pair Corralation between STMicroelectronics and UNIQA Insurance

Assuming the 90 days horizon STMicroelectronics is expected to generate 3.25 times less return on investment than UNIQA Insurance. In addition to that, STMicroelectronics is 2.13 times more volatile than UNIQA Insurance Group. It trades about 0.06 of its total potential returns per unit of risk. UNIQA Insurance Group is currently generating about 0.41 per unit of volatility. If you would invest  725.00  in UNIQA Insurance Group on October 11, 2024 and sell it today you would earn a total of  63.00  from holding UNIQA Insurance Group or generate 8.69% 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.  UNIQA Insurance Group

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.

UNIQA Insurance Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UNIQA Insurance Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, UNIQA Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with STMicroelectronics and UNIQA Insurance

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

The idea behind STMicroelectronics NV and UNIQA Insurance Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.