Correlation Between Bio Techne and STMicroelectronics

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

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

Diversification Opportunities for Bio Techne and STMicroelectronics

0.15

Correlation Coefficient

Bio Techne  STMicroelectronics

Average diversification

The 3 months correlation between Bio and STMicroelectronics is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bio Techne and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Bio Techne 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 Bio Techne are associated (or correlated) with STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Bio Techne i.e., Bio Techne and STMicroelectronics go up and down completely randomly.

Pair Corralation between Bio Techne and STMicroelectronics

Assuming the 90 days trading horizon Bio Techne is expected to generate 2.13 times more return on investment than STMicroelectronics. However, Bio Techne is 2.13 times more volatile than STMicroelectronics NV. It trades about 0.1 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.01 per unit of risk. If you would invest  1,334  in Bio Techne on September 13, 2024 and sell it today you would earn a total of  304.00  from holding Bio Techne or generate 22.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Bio Techne  vs.  STMicroelectronics NV

Bio Techne

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bio Techne are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Bio Techne sustained solid returns over the last few months and may actually be approaching a breakup point.

STMicroelectronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, STMicroelectronics is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bio Techne and STMicroelectronics

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

The idea behind Bio Techne and STMicroelectronics NV 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.