Correlation Between STMicroelectronics and Analog Devices
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Analog Devices 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 Analog Devices 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 Analog Devices, you can compare the effects of market volatilities on STMicroelectronics and Analog Devices 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 Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Analog Devices.
Diversification Opportunities for STMicroelectronics and Analog Devices
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between STMicroelectronics and Analog is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices 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 Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Analog Devices go up and down completely randomly.
Pair Corralation between STMicroelectronics and Analog Devices
Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to under-perform the Analog Devices. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV ADR is 1.07 times less risky than Analog Devices. The stock trades about -0.3 of its potential returns per unit of risk. The Analog Devices is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 19,432 in Analog Devices on January 20, 2024 and sell it today you would lose (674.00) from holding Analog Devices or give up 3.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV ADR vs. Analog Devices
Performance |
| Timeline |
| STMicroelectronics NV ADR |
| Analog Devices |
STMicroelectronics and Analog Devices Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Analog Devices
The main advantage of trading using opposite STMicroelectronics and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.| STMicroelectronics vs. NXP Semiconductors NV | STMicroelectronics vs. Analog Devices | STMicroelectronics vs. ON Semiconductor | STMicroelectronics vs. Lattice Semiconductor |
| Analog Devices vs. NXP Semiconductors NV | Analog Devices vs. Qualcomm Incorporated | Analog Devices vs. Broadcom | Analog Devices vs. Microchip Technology |
Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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