Correlation Between DISCOVERY and STMicroelectronics

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

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

Diversification Opportunities for DISCOVERY and STMicroelectronics

0.0

Correlation Coefficient

DISCOVERY  STMicroelectronics

Pay attention - limited upside

The 3 months correlation between DISCOVERY and STMicroelectronics is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DISCOVERY MUNICATIONS LLC and STMicroelectronics NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics NV ADR and DISCOVERY 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 DISCOVERY MUNICATIONS LLC 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 NV ADR has no effect on the direction of DISCOVERY i.e., DISCOVERY and STMicroelectronics go up and down completely randomly.

Pair Corralation between DISCOVERY and STMicroelectronics

If you would invest  0.00  in DISCOVERY MUNICATIONS LLC on September 15, 2024 and sell it today you would earn a total of  0.00  from holding DISCOVERY MUNICATIONS LLC or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

DISCOVERY MUNICATIONS LLC  vs.  STMicroelectronics NV ADR

DISCOVERY MUNICATIONS LLC

Risk-Adjusted Performance

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Very Weak

Over the last 90 days DISCOVERY MUNICATIONS LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DISCOVERY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

STMicroelectronics NV ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMicroelectronics NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, STMicroelectronics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with DISCOVERY and STMicroelectronics

The main advantage of trading using opposite DISCOVERY and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DISCOVERY 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 DISCOVERY MUNICATIONS LLC and STMicroelectronics NV ADR 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.