Correlation Between STMicroelectronics and Aeon

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

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

Diversification Opportunities for STMicroelectronics and Aeon

-0.38

Correlation Coefficient

STMicroelectronics  Aeon

Very good diversification

The 3 months correlation between STMicroelectronics and Aeon is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and Aeon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon 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 ADR are associated (or correlated) with Aeon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Aeon go up and down completely randomly.

Pair Corralation between STMicroelectronics and Aeon

If you would invest  2,553  in STMicroelectronics NV ADR on October 26, 2024 and sell it today you would lose (8.00) from holding STMicroelectronics NV ADR or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.56%
Values	Daily Returns

STMicroelectronics NV ADR  vs.  Aeon Co

STMicroelectronics NV ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMicroelectronics NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Aeon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aeon is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with STMicroelectronics and Aeon

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

The idea behind STMicroelectronics NV ADR and Aeon Co 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.