Correlation Between STMicroelectronics and Netmedia Group

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

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

Diversification Opportunities for STMicroelectronics and Netmedia Group

0.41

Correlation Coefficient

STMicroelectronics  Netmedia Group

Very weak diversification

The 3 months correlation between STMicroelectronics and Netmedia is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Netmedia Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netmedia Group SA 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 Netmedia Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netmedia Group SA has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Netmedia Group go up and down completely randomly.

Pair Corralation between STMicroelectronics and Netmedia Group

Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Netmedia Group. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.61 times less risky than Netmedia Group. The stock trades about -0.06 of its potential returns per unit of risk. The Netmedia Group SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  167.00  in Netmedia Group SA on December 29, 2024 and sell it today you would lose (22.00) from holding Netmedia Group SA or give up 13.17% of portfolio value over 90 days.

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

STMicroelectronics NV  vs.  Netmedia Group SA

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.

Netmedia Group SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Netmedia Group SA 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.

Pair Trading with STMicroelectronics and Netmedia Group

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

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