Correlation Between STMicroelectronics and Lexibook Linguistic

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

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

Diversification Opportunities for STMicroelectronics and Lexibook Linguistic

-0.32

Correlation Coefficient

STMicroelectronics  Lexibook Linguistic

Very good diversification

The 3 months correlation between STMicroelectronics and Lexibook is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Lexibook Linguistic Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexibook Linguistic 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 Lexibook Linguistic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexibook Linguistic has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Lexibook Linguistic go up and down completely randomly.

Pair Corralation between STMicroelectronics and Lexibook Linguistic

Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Lexibook Linguistic. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.19 times less risky than Lexibook Linguistic. The stock trades about -0.06 of its potential returns per unit of risk. The Lexibook Linguistic Electronic is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  398.00  in Lexibook Linguistic Electronic on December 29, 2024 and sell it today you would earn a total of  108.00  from holding Lexibook Linguistic Electronic or generate 27.14% return on investment over 90 days.

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

STMicroelectronics NV  vs.  Lexibook Linguistic Electronic

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. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Lexibook Linguistic

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lexibook Linguistic Electronic are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Lexibook Linguistic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and Lexibook Linguistic

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

The idea behind STMicroelectronics NV and Lexibook Linguistic Electronic 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 Anywhere module to track or share privately all of your investments from the convenience of any device.