Correlation Between STMicroelectronics and Gladstone Commercial

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

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

Diversification Opportunities for STMicroelectronics and Gladstone Commercial

-0.6

Correlation Coefficient

STMicroelectronics  Gladstone Commercial

Excellent diversification

The 3 months correlation between STMicroelectronics and Gladstone is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Gladstone Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Commercial 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 Gladstone Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Commercial has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Gladstone Commercial go up and down completely randomly.

Pair Corralation between STMicroelectronics and Gladstone Commercial

Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Gladstone Commercial. In addition to that, STMicroelectronics is 1.14 times more volatile than Gladstone Commercial. It trades about -0.03 of its total potential returns per unit of risk. Gladstone Commercial is currently generating about 0.1 per unit of volatility. If you would invest  1,378  in Gladstone Commercial on September 23, 2024 and sell it today you would earn a total of  155.00  from holding Gladstone Commercial or generate 11.25% return on investment over 90 days.

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

STMicroelectronics NV  vs.  Gladstone Commercial

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. Despite nearly stable basic indicators, STMicroelectronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Gladstone Commercial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Commercial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gladstone Commercial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with STMicroelectronics and Gladstone Commercial

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

The idea behind STMicroelectronics NV and Gladstone Commercial 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.