Correlation Between Kaufman Et and STMicroelectronics

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

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

Diversification Opportunities for Kaufman Et and STMicroelectronics

0.34

Correlation Coefficient

Kaufman Et  STMicroelectronics

Weak diversification

The 3 months correlation between Kaufman and STMicroelectronics is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Kaufman Et Broad and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Kaufman Et 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 Kaufman Et Broad 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 Kaufman Et i.e., Kaufman Et and STMicroelectronics go up and down completely randomly.

Pair Corralation between Kaufman Et and STMicroelectronics

Assuming the 90 days trading horizon Kaufman Et Broad is expected to generate 0.76 times more return on investment than STMicroelectronics. However, Kaufman Et Broad is 1.31 times less risky than STMicroelectronics. It trades about 0.03 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.01 per unit of risk. If you would invest  3,190  in Kaufman Et Broad on September 25, 2024 and sell it today you would earn a total of  25.00  from holding Kaufman Et Broad or generate 0.78% return on investment over 90 days.

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

Kaufman Et Broad  vs.  STMicroelectronics NV

Kaufman Et Broad

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kaufman Et Broad are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Kaufman Et is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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. In spite of comparatively stable basic indicators, STMicroelectronics is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Kaufman Et and STMicroelectronics

The main advantage of trading using opposite Kaufman Et and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaufman Et 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 Kaufman Et Broad 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.