Correlation Between STMicroelectronics and Worthington Steel

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

Diversification Opportunities for STMicroelectronics and Worthington Steel

0.12

Correlation Coefficient

STMicroelectronics  Worthington Steel

Average diversification

The 3 months correlation between STMicroelectronics and Worthington is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and Worthington Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worthington Steel 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 Worthington Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worthington Steel has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Worthington Steel go up and down completely randomly.

Pair Corralation between STMicroelectronics and Worthington Steel

Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to generate 1.23 times more return on investment than Worthington Steel. However, STMicroelectronics is 1.23 times more volatile than Worthington Steel. It trades about -0.01 of its potential returns per unit of risk. Worthington Steel is currently generating about -0.12 per unit of risk. If you would invest  2,544  in STMicroelectronics NV ADR on December 26, 2024 and sell it today you would lose (140.00) from holding STMicroelectronics NV ADR or give up 5.5% 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.  Worthington Steel

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.

Worthington Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Worthington Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with STMicroelectronics and Worthington Steel

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

The idea behind STMicroelectronics NV ADR and Worthington Steel 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.