Correlation Between STMicroelectronics and Ichor Holdings

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

Diversification Opportunities for STMicroelectronics and Ichor Holdings

0.0

Correlation Coefficient

STMicroelectronics  Ichor Holdings

Pay attention - limited upside

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

Pair Corralation between STMicroelectronics and Ichor Holdings

Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to generate 0.8 times more return on investment than Ichor Holdings. However, STMicroelectronics NV ADR is 1.25 times less risky than Ichor Holdings. It trades about -0.01 of its potential returns per unit of risk. Ichor Holdings is currently generating about -0.04 per unit of risk. If you would invest  2,567  in STMicroelectronics NV ADR on December 24, 2024 and sell it today you would lose (135.00) from holding STMicroelectronics NV ADR or give up 5.26% of portfolio value over 90 days.

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

STMicroelectronics NV ADR  vs.  Ichor Holdings

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 very healthy basic indicators, STMicroelectronics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Ichor Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ichor Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with STMicroelectronics and Ichor Holdings

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

The idea behind STMicroelectronics NV ADR and Ichor Holdings 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 Anywhere module to track or share privately all of your investments from the convenience of any device.