Correlation Between STMicroelectronics and Intermediate Capital

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

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

Diversification Opportunities for STMicroelectronics and Intermediate Capital

0.16

Correlation Coefficient

STMicroelectronics  Intermediate Capital

Average diversification

The 3 months correlation between STMicroelectronics and Intermediate is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Intermediate Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Capital 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 Intermediate Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Capital has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Intermediate Capital go up and down completely randomly.

Pair Corralation between STMicroelectronics and Intermediate Capital

Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Intermediate Capital. In addition to that, STMicroelectronics is 1.19 times more volatile than Intermediate Capital Group. It trades about -0.07 of its total potential returns per unit of risk. Intermediate Capital Group is currently generating about 0.03 per unit of volatility. If you would invest  207,600  in Intermediate Capital Group on September 3, 2024 and sell it today you would earn a total of  4,200  from holding Intermediate Capital Group or generate 2.02% return on investment over 90 days.

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

STMicroelectronics NV  vs.  Intermediate Capital Group

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Intermediate Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Capital Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Intermediate Capital is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with STMicroelectronics and Intermediate Capital

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

The idea behind STMicroelectronics NV and Intermediate Capital Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.