Correlation Between STMicroelectronics and Pettenati

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

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

Diversification Opportunities for STMicroelectronics and Pettenati

-0.2

Correlation Coefficient

STMicroelectronics  Pettenati

Good diversification

The 3 months correlation between STMicroelectronics and Pettenati is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Pettenati SA Industria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pettenati SA Industria 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 Pettenati. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pettenati SA Industria has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Pettenati go up and down completely randomly.

Pair Corralation between STMicroelectronics and Pettenati

Assuming the 90 days trading horizon STMicroelectronics NV is expected to generate 0.8 times more return on investment than Pettenati. However, STMicroelectronics NV is 1.26 times less risky than Pettenati. It trades about 0.37 of its potential returns per unit of risk. Pettenati SA Industria is currently generating about -0.22 per unit of risk. If you would invest  14,200  in STMicroelectronics NV on September 23, 2024 and sell it today you would earn a total of  1,800  from holding STMicroelectronics NV or generate 12.68% return on investment over 90 days.

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

STMicroelectronics NV  vs.  Pettenati SA Industria

STMicroelectronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, STMicroelectronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pettenati SA Industria

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pettenati SA Industria has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with STMicroelectronics and Pettenati

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

The idea behind STMicroelectronics NV and Pettenati SA Industria 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.