Correlation Between STMicroelectronics and Marfrig Global

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

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

Diversification Opportunities for STMicroelectronics and Marfrig Global

-0.2

Correlation Coefficient

STMicroelectronics  Marfrig Global

Good diversification

The 3 months correlation between STMicroelectronics and Marfrig is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Marfrig Global Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marfrig Global Foods 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 Marfrig Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marfrig Global Foods has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Marfrig Global go up and down completely randomly.

Pair Corralation between STMicroelectronics and Marfrig Global

Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Marfrig Global. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.33 times less risky than Marfrig Global. The stock trades about -0.04 of its potential returns per unit of risk. The Marfrig Global Foods is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  648.00  in Marfrig Global Foods on October 8, 2024 and sell it today you would earn a total of  1,037  from holding Marfrig Global Foods or generate 160.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.56%
Values	Daily Returns

STMicroelectronics NV  vs.  Marfrig Global Foods

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.

Marfrig Global Foods

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Marfrig Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and Marfrig Global

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

The idea behind STMicroelectronics NV and Marfrig Global Foods 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.