Correlation Between Electrovaya Common and STMicroelectronics

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

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

Diversification Opportunities for Electrovaya Common and STMicroelectronics

-0.44

Correlation Coefficient

Electrovaya Common  STMicroelectronics

Very good diversification

The 3 months correlation between Electrovaya and STMicroelectronics is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Electrovaya Common Shares 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 Electrovaya Common 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 Electrovaya Common Shares 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 Electrovaya Common i.e., Electrovaya Common and STMicroelectronics go up and down completely randomly.

Pair Corralation between Electrovaya Common and STMicroelectronics

Given the investment horizon of 90 days Electrovaya Common Shares is expected to generate 1.8 times more return on investment than STMicroelectronics. However, Electrovaya Common is 1.8 times more volatile than STMicroelectronics NV ADR. It trades about 0.08 of its potential returns per unit of risk. STMicroelectronics NV ADR is currently generating about -0.05 per unit of risk. If you would invest  225.00  in Electrovaya Common Shares on September 13, 2024 and sell it today you would earn a total of  33.00  from holding Electrovaya Common Shares or generate 14.67% return on investment over 90 days.

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

Electrovaya Common Shares  vs.  STMicroelectronics NV ADR

Electrovaya Common Shares

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Electrovaya Common Shares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Electrovaya Common sustained solid returns over the last few months and may actually be approaching a breakup point.

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Electrovaya Common and STMicroelectronics

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

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.