Correlation Between STMicroelectronics and ZCCM Investments

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

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

Diversification Opportunities for STMicroelectronics and ZCCM Investments

0.39

Correlation Coefficient

STMicroelectronics  ZCCM Investments

Weak diversification

The 3 months correlation between STMicroelectronics and ZCCM is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and ZCCM Investments Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZCCM Investments Holdings 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 ZCCM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZCCM Investments Holdings has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and ZCCM Investments go up and down completely randomly.

Pair Corralation between STMicroelectronics and ZCCM Investments

Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the ZCCM Investments. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.29 times less risky than ZCCM Investments. The stock trades about -0.04 of its potential returns per unit of risk. The ZCCM Investments Holdings is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  128.00  in ZCCM Investments Holdings on December 28, 2024 and sell it today you would lose (6.00) from holding ZCCM Investments Holdings or give up 4.69% of portfolio value over 90 days.

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

STMicroelectronics NV  vs.  ZCCM Investments Holdings

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.

ZCCM Investments Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days ZCCM Investments Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, ZCCM Investments is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with STMicroelectronics and ZCCM Investments

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

The idea behind STMicroelectronics NV and ZCCM Investments Holdings 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.