Correlation Between STMicroelectronics and Sixt Leasing

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

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

Diversification Opportunities for STMicroelectronics and Sixt Leasing

0.69

Correlation Coefficient

STMicroelectronics  Sixt Leasing

Poor diversification

The 3 months correlation between STMicroelectronics and Sixt is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Sixt Leasing SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sixt Leasing SE 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 Sixt Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sixt Leasing SE has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Sixt Leasing go up and down completely randomly.

Pair Corralation between STMicroelectronics and Sixt Leasing

Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the Sixt Leasing. In addition to that, STMicroelectronics is 1.33 times more volatile than Sixt Leasing SE. It trades about -0.11 of its total potential returns per unit of risk. Sixt Leasing SE is currently generating about -0.1 per unit of volatility. If you would invest  1,040  in Sixt Leasing SE on September 3, 2024 and sell it today you would lose (115.00) from holding Sixt Leasing SE or give up 11.06% of portfolio value over 90 days.

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

STMicroelectronics NV  vs.  Sixt Leasing SE

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sixt Leasing SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sixt Leasing SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile 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.

Pair Trading with STMicroelectronics and Sixt Leasing

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

The idea behind STMicroelectronics NV and Sixt Leasing SE 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.