Correlation Between Global X and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Global X 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 Global X and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Funds and STMicroelectronics NV, you can compare the effects of market volatilities on Global X 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 Global X with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and STMicroelectronics.
Diversification Opportunities for Global X and STMicroelectronics
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Global and STMicroelectronics is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Global X 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 Global X Funds 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 Global X i.e., Global X and STMicroelectronics go up and down completely randomly.
Pair Corralation between Global X and STMicroelectronics
Assuming the 90 days trading horizon Global X Funds is expected to generate 0.72 times more return on investment than STMicroelectronics. However, Global X Funds is 1.39 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 4,188 in Global X Funds on September 11, 2024 and sell it today you would earn a total of 962.00 from holding Global X Funds or generate 22.97% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Global X Funds vs. STMicroelectronics NV
Performance |
Timeline |
Global X Funds |
STMicroelectronics |
Global X and STMicroelectronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Global X and STMicroelectronics
The main advantage of trading using opposite Global X and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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.Global X vs. Zoom Video Communications | Global X vs. Extra Space Storage | Global X vs. SVB Financial Group | Global X vs. Prudential Financial |
STMicroelectronics vs. Taiwan Semiconductor Manufacturing | STMicroelectronics vs. Broadcom | STMicroelectronics vs. Micron Technology | STMicroelectronics vs. NXP Semiconductors NV |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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