Correlation Between STMicroelectronics and Quantum EMotion

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

Diversification Opportunities for STMicroelectronics and Quantum EMotion

0.19

Correlation Coefficient

STMicroelectronics  Quantum EMotion

Average diversification

The 3 months correlation between STMicroelectronics and Quantum is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and Quantum eMotion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantum eMotion 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 Quantum EMotion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantum eMotion has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Quantum EMotion go up and down completely randomly.

Pair Corralation between STMicroelectronics and Quantum EMotion

Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to under-perform the Quantum EMotion. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV ADR is 5.22 times less risky than Quantum EMotion. The stock trades about -0.01 of its potential returns per unit of risk. The Quantum eMotion is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Quantum eMotion on December 25, 2024 and sell it today you would lose (23.00) from holding Quantum eMotion or give up 32.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

STMicroelectronics NV ADR  vs.  Quantum eMotion

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.

Quantum eMotion

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Quantum eMotion are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Quantum EMotion reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and Quantum EMotion

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

The idea behind STMicroelectronics NV ADR and Quantum eMotion 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.