Correlation Between STMicroelectronics and NVIDIA
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and NVIDIA 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 NVIDIA 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 NVIDIA, you can compare the effects of market volatilities on STMicroelectronics and NVIDIA 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 NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and NVIDIA.
Diversification Opportunities for STMicroelectronics and NVIDIA
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between STMicroelectronics and NVIDIA is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA 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 NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and NVIDIA go up and down completely randomly.
Pair Corralation between STMicroelectronics and NVIDIA
Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to under-perform the NVIDIA. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV ADR is 1.3 times less risky than NVIDIA. The stock trades about -0.25 of its potential returns per unit of risk. The NVIDIA is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 89,398 in NVIDIA on January 19, 2024 and sell it today you would lose (4,727) from holding NVIDIA or give up 5.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV ADR vs. NVIDIA
Performance |
| Timeline |
| STMicroelectronics NV ADR |
| NVIDIA |
STMicroelectronics and NVIDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and NVIDIA
The main advantage of trading using opposite STMicroelectronics and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, NVIDIA 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 NVIDIA will offset losses from the drop in NVIDIA's long position.| STMicroelectronics vs. NXP Semiconductors NV | STMicroelectronics vs. Analog Devices | STMicroelectronics vs. ON Semiconductor | STMicroelectronics vs. Lattice Semiconductor |
| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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