Correlation Between STMicroelectronics and Edgewell Personal

Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Edgewell Personal 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 Edgewell Personal 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 Edgewell Personal Care, you can compare the effects of market volatilities on STMicroelectronics and Edgewell Personal 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 Edgewell Personal. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Edgewell Personal.

Diversification Opportunities for STMicroelectronics and Edgewell Personal

0.16

Correlation Coefficient

STMicroelectronics  Edgewell Personal

Average diversification

The 3 months correlation between STMicroelectronics and Edgewell is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and Edgewell Personal Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewell Personal Care 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 Edgewell Personal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewell Personal Care has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Edgewell Personal go up and down completely randomly.

Pair Corralation between STMicroelectronics and Edgewell Personal

Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to under-perform the Edgewell Personal. In addition to that, STMicroelectronics is 1.61 times more volatile than Edgewell Personal Care. It trades about -0.04 of its total potential returns per unit of risk. Edgewell Personal Care is currently generating about -0.06 per unit of volatility. If you would invest  3,334  in Edgewell Personal Care on December 30, 2024 and sell it today you would lose (269.00) from holding Edgewell Personal Care or give up 8.07% of portfolio value over 90 days.

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

STMicroelectronics NV ADR  vs.  Edgewell Personal Care

STMicroelectronics NV ADR

Risk-Adjusted Performance

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.

Edgewell Personal Care

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edgewell Personal Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with STMicroelectronics and Edgewell Personal

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

The idea behind STMicroelectronics NV ADR and Edgewell Personal Care 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.