Correlation Between STMicroelectronics and Kolibri Global

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

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

Diversification Opportunities for STMicroelectronics and Kolibri Global

-0.6

Correlation Coefficient

STMicroelectronics  Kolibri Global

Excellent diversification

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

Pair Corralation between STMicroelectronics and Kolibri Global

Considering the 90-day investment horizon STMicroelectronics is expected to generate 8.06 times less return on investment than Kolibri Global. But when comparing it to its historical volatility, STMicroelectronics NV ADR is 1.87 times less risky than Kolibri Global. It trades about 0.18 of its potential returns per unit of risk. Kolibri Global Energy is currently generating about 0.79 of returns per unit of risk over similar time horizon. If you would invest  362.00  in Kolibri Global Energy on September 17, 2024 and sell it today you would earn a total of  193.00  from holding Kolibri Global Energy or generate 53.31% return on investment over 90 days.

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

STMicroelectronics NV ADR  vs.  Kolibri Global Energy

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 very healthy basic indicators, STMicroelectronics is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Kolibri Global Energy

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kolibri Global Energy are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, Kolibri Global demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and Kolibri Global

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

The idea behind STMicroelectronics NV ADR and Kolibri Global Energy 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..