Correlation Between STMICROELECTRONICS and MARKET VECTR

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

By analyzing existing cross correlation between STMICROELECTRONICS and MARKET VECTR RETAIL, you can compare the effects of market volatilities on STMICROELECTRONICS and MARKET VECTR 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 MARKET VECTR. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMICROELECTRONICS and MARKET VECTR.

Diversification Opportunities for STMICROELECTRONICS and MARKET VECTR

-0.58

Correlation Coefficient

STMICROELECTRONICS  MARKET VECTR

Excellent diversification

The 3 months correlation between STMICROELECTRONICS and MARKET is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and MARKET VECTR RETAIL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARKET VECTR RETAIL 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 are associated (or correlated) with MARKET VECTR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARKET VECTR RETAIL has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and MARKET VECTR go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and MARKET VECTR

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to under-perform the MARKET VECTR. In addition to that, STMICROELECTRONICS is 2.11 times more volatile than MARKET VECTR RETAIL. It trades about -0.04 of its total potential returns per unit of risk. MARKET VECTR RETAIL is currently generating about 0.24 per unit of volatility. If you would invest  19,306  in MARKET VECTR RETAIL on September 23, 2024 and sell it today you would earn a total of  2,664  from holding MARKET VECTR RETAIL or generate 13.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

STMICROELECTRONICS  vs.  MARKET VECTR RETAIL

STMICROELECTRONICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMICROELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, STMICROELECTRONICS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

MARKET VECTR RETAIL

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MARKET VECTR RETAIL are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, MARKET VECTR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMICROELECTRONICS and MARKET VECTR

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

The idea behind STMICROELECTRONICS and MARKET VECTR RETAIL 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..