Correlation Between STMicroelectronics and Tres Tentos

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

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

Diversification Opportunities for STMicroelectronics and Tres Tentos

-0.66

Correlation Coefficient

STMicroelectronics  Tres Tentos

Excellent diversification

The 3 months correlation between STMicroelectronics and Tres is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Tres Tentos Agroindustrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tres Tentos Agroindu 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 Tres Tentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tres Tentos Agroindu has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Tres Tentos go up and down completely randomly.

Pair Corralation between STMicroelectronics and Tres Tentos

Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Tres Tentos. In addition to that, STMicroelectronics is 1.09 times more volatile than Tres Tentos Agroindustrial. It trades about -0.01 of its total potential returns per unit of risk. Tres Tentos Agroindustrial is currently generating about 0.06 per unit of volatility. If you would invest  1,358  in Tres Tentos Agroindustrial on December 2, 2024 and sell it today you would earn a total of  110.00  from holding Tres Tentos Agroindustrial or generate 8.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.32%
Values	Daily Returns

STMicroelectronics NV  vs.  Tres Tentos Agroindustrial

STMicroelectronics

Risk-Adjusted Performance

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.

Tres Tentos Agroindu

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tres Tentos Agroindustrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Tres Tentos may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with STMicroelectronics and Tres Tentos

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

The idea behind STMicroelectronics NV and Tres Tentos Agroindustrial 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.