Correlation Between STMicroelectronics and Kopin

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

Diversification Opportunities for STMicroelectronics and Kopin

-0.38

Correlation Coefficient

STMicroelectronics  Kopin

Very good diversification

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

Pair Corralation between STMicroelectronics and Kopin

Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to under-perform the Kopin. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV ADR is 2.32 times less risky than Kopin. The stock trades about -0.01 of its potential returns per unit of risk. The Kopin is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  128.00  in Kopin on December 24, 2024 and sell it today you would earn a total of  2.00  from holding Kopin or generate 1.56% return on investment over 90 days.

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

STMicroelectronics NV ADR  vs.  Kopin

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.

Kopin

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kopin are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Kopin displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and Kopin

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

The idea behind STMicroelectronics NV ADR and Kopin 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .