Correlation Between STMicroelectronics and Sogeclair

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

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

Diversification Opportunities for STMicroelectronics and Sogeclair

0.17

Correlation Coefficient

STMicroelectronics  Sogeclair

Average diversification

The 3 months correlation between STMicroelectronics and Sogeclair is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Sogeclair SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sogeclair 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 Sogeclair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sogeclair SA has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Sogeclair go up and down completely randomly.

Pair Corralation between STMicroelectronics and Sogeclair

Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Sogeclair. In addition to that, STMicroelectronics is 1.36 times more volatile than Sogeclair SA. It trades about -0.01 of its total potential returns per unit of risk. Sogeclair SA is currently generating about 0.1 per unit of volatility. If you would invest  1,785  in Sogeclair SA on December 2, 2024 and sell it today you would earn a total of  215.00  from holding Sogeclair SA or generate 12.04% return on investment over 90 days.

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

STMicroelectronics NV  vs.  Sogeclair 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 relatively invariable basic indicators, STMicroelectronics is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Sogeclair SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sogeclair SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Sogeclair reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and Sogeclair

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

The idea behind STMicroelectronics NV and Sogeclair 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.

Check out your portfolio center.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.