Correlation Between Vericel Corp and STMicroelectronics

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

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

Diversification Opportunities for Vericel Corp and STMicroelectronics

-0.65

Correlation Coefficient

Vericel Corp  STMicroelectronics

Excellent diversification

The 3 months correlation between Vericel and STMicroelectronics is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Vericel Corp Ord and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Vericel Corp 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 Vericel Corp Ord 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 Vericel Corp i.e., Vericel Corp and STMicroelectronics go up and down completely randomly.

Pair Corralation between Vericel Corp and STMicroelectronics

Given the investment horizon of 90 days Vericel Corp Ord is expected to generate 0.62 times more return on investment than STMicroelectronics. However, Vericel Corp Ord is 1.62 times less risky than STMicroelectronics. It trades about 0.26 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.01 per unit of risk. If you would invest  4,009  in Vericel Corp Ord on October 10, 2024 and sell it today you would earn a total of  1,799  from holding Vericel Corp Ord or generate 44.87% return on investment over 90 days.

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

Vericel Corp Ord  vs.  STMicroelectronics NV

Vericel Corp Ord

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vericel Corp Ord are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Vericel Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.

STMicroelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMicroelectronics NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, STMicroelectronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vericel Corp and STMicroelectronics

The main advantage of trading using opposite Vericel Corp and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vericel Corp 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 Vericel Corp Ord 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.