Correlation Between STMicroelectronics and Barclays PLC

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

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

Diversification Opportunities for STMicroelectronics and Barclays PLC

-0.06

Correlation Coefficient

STMicroelectronics  Barclays PLC

Good diversification

The 3 months correlation between STMicroelectronics and Barclays is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Barclays PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays PLC 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 Barclays PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays PLC has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Barclays PLC go up and down completely randomly.

Pair Corralation between STMicroelectronics and Barclays PLC

Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Barclays PLC. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.4 times less risky than Barclays PLC. The stock trades about -0.2 of its potential returns per unit of risk. The Barclays PLC is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  8,156  in Barclays PLC on October 6, 2024 and sell it today you would lose (26.00) from holding Barclays PLC or give up 0.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

STMicroelectronics NV  vs.  Barclays PLC

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 somewhat strong primary indicators, STMicroelectronics is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Barclays PLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Barclays PLC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and Barclays PLC

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

The idea behind STMicroelectronics NV and Barclays PLC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.