Correlation Between STMicroelectronics and Gap,

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

Diversification Opportunities for STMicroelectronics and Gap,

-0.53

Correlation Coefficient

STMicroelectronics  Gap,

Excellent diversification

The 3 months correlation between STMicroelectronics and Gap, is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Gap, go up and down completely randomly.

Pair Corralation between STMicroelectronics and Gap,

Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to under-perform the Gap,. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV ADR is 1.52 times less risky than Gap,. The stock trades about -0.03 of its potential returns per unit of risk. The The Gap, is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,200  in The Gap, on October 4, 2024 and sell it today you would earn a total of  1,161  from holding The Gap, or generate 96.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

STMicroelectronics NV ADR  vs.  The Gap,

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.

Gap,

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and Gap,

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

The idea behind STMicroelectronics NV ADR and The Gap, 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.