Correlation Between STMicroelectronics and Amkor Technology

Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Amkor Technology 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 Amkor Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between STMicroelectronics NV and Amkor Technology, you can compare the effects of market volatilities on STMicroelectronics and Amkor Technology 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 Amkor Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Amkor Technology.

Diversification Opportunities for STMicroelectronics and Amkor Technology

0.82

Correlation Coefficient

STMicroelectronics  Amkor Technology

Very poor diversification

The 3 months correlation between STMicroelectronics and Amkor is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Amkor Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amkor Technology 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 are associated (or correlated) with Amkor Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amkor Technology has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Amkor Technology go up and down completely randomly.

Pair Corralation between STMicroelectronics and Amkor Technology

Assuming the 90 days horizon STMicroelectronics NV is expected to generate 1.83 times more return on investment than Amkor Technology. However, STMicroelectronics is 1.83 times more volatile than Amkor Technology. It trades about 0.05 of its potential returns per unit of risk. Amkor Technology is currently generating about -0.07 per unit of risk. If you would invest  2,331  in STMicroelectronics NV on September 23, 2024 and sell it today you would earn a total of  64.00  from holding STMicroelectronics NV or generate 2.75% return on investment over 90 days.

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

STMicroelectronics NV  vs.  Amkor Technology

STMicroelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMicroelectronics NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Amkor Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amkor Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with STMicroelectronics and Amkor Technology

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

The idea behind STMicroelectronics NV and Amkor Technology 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.