Correlation Between STMicroelectronics and Elevance Health,

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

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

Diversification Opportunities for STMicroelectronics and Elevance Health,

0.28

Correlation Coefficient

STMicroelectronics  Elevance Health,

Modest diversification

The 3 months correlation between STMicroelectronics and Elevance is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Elevance Health, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elevance Health, 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 Elevance Health,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elevance Health, has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Elevance Health, go up and down completely randomly.

Pair Corralation between STMicroelectronics and Elevance Health,

Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Elevance Health,. In addition to that, STMicroelectronics is 1.29 times more volatile than Elevance Health,. It trades about -0.04 of its total potential returns per unit of risk. Elevance Health, is currently generating about -0.04 per unit of volatility. If you would invest  49,285  in Elevance Health, on October 22, 2024 and sell it today you would lose (1,621) from holding Elevance Health, or give up 3.29% of portfolio value over 90 days.

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

STMicroelectronics NV  vs.  Elevance Health,

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 current stock price disturbance, may contribute to short-term losses for the investors.

Elevance Health,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elevance Health, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Elevance Health, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with STMicroelectronics and Elevance Health,

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

The idea behind STMicroelectronics NV and Elevance Health, 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.