Correlation Between STMicroelectronics and Public Storage

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

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

Diversification Opportunities for STMicroelectronics and Public Storage

-0.12

Correlation Coefficient

STMicroelectronics  Public Storage

Good diversification

The 3 months correlation between STMicroelectronics and Public is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Public Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Storage 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 Public Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Storage has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Public Storage go up and down completely randomly.

Pair Corralation between STMicroelectronics and Public Storage

Assuming the 90 days trading horizon STMicroelectronics NV is expected to generate 0.93 times more return on investment than Public Storage. However, STMicroelectronics NV is 1.08 times less risky than Public Storage. It trades about -0.01 of its potential returns per unit of risk. Public Storage is currently generating about -0.04 per unit of risk. If you would invest  15,345  in STMicroelectronics NV on October 9, 2024 and sell it today you would lose (327.00) from holding STMicroelectronics NV or give up 2.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

STMicroelectronics NV  vs.  Public Storage

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.

Public Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Public Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Public Storage 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 Public Storage

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

The idea behind STMicroelectronics NV and Public Storage 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..