Correlation Between STMicroelectronics and CHEMICAL INDUSTRIES

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

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

Diversification Opportunities for STMicroelectronics and CHEMICAL INDUSTRIES

0.0

Correlation Coefficient

STMicroelectronics  CHEMICAL INDUSTRIES

Pay attention - limited upside

The 3 months correlation between STMicroelectronics and CHEMICAL is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and CHEMICAL INDUSTRIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHEMICAL INDUSTRIES has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and CHEMICAL INDUSTRIES go up and down completely randomly.

Pair Corralation between STMicroelectronics and CHEMICAL INDUSTRIES

If you would invest  2,427  in STMicroelectronics NV on October 15, 2024 and sell it today you would earn a total of  24.00  from holding STMicroelectronics NV or generate 0.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

STMicroelectronics NV  vs.  CHEMICAL INDUSTRIES

STMicroelectronics

Risk-Adjusted Performance

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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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

CHEMICAL INDUSTRIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHEMICAL INDUSTRIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, CHEMICAL INDUSTRIES is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with STMicroelectronics and CHEMICAL INDUSTRIES

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

The idea behind STMicroelectronics NV and CHEMICAL INDUSTRIES 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.