Correlation Between STMicroelectronics and Unifique Telecomunicaes

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

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

Diversification Opportunities for STMicroelectronics and Unifique Telecomunicaes

-0.19

Correlation Coefficient

STMicroelectronics  Unifique Telecomunicaes

Good diversification

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

Pair Corralation between STMicroelectronics and Unifique Telecomunicaes

Assuming the 90 days trading horizon STMicroelectronics NV is expected to generate 0.69 times more return on investment than Unifique Telecomunicaes. However, STMicroelectronics NV is 1.44 times less risky than Unifique Telecomunicaes. It trades about -0.15 of its potential returns per unit of risk. Unifique Telecomunicaes SA is currently generating about -0.22 per unit of risk. If you would invest  15,739  in STMicroelectronics NV on October 1, 2024 and sell it today you would lose (589.00) from holding STMicroelectronics NV or give up 3.74% of portfolio value over 90 days.

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

STMicroelectronics NV  vs.  Unifique Telecomunicaes SA

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.

Unifique Telecomunicaes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unifique Telecomunicaes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with STMicroelectronics and Unifique Telecomunicaes

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

The idea behind STMicroelectronics NV and Unifique Telecomunicaes SA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.