Correlation Between ECHO INVESTMENT and STMicroelectronics

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

By analyzing existing cross correlation between ECHO INVESTMENT ZY and STMicroelectronics NV, you can compare the effects of market volatilities on ECHO INVESTMENT and STMicroelectronics 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 ECHO INVESTMENT with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECHO INVESTMENT and STMicroelectronics.

Diversification Opportunities for ECHO INVESTMENT and STMicroelectronics

0.03

Correlation Coefficient

ECHO INVESTMENT  STMicroelectronics

Significant diversification

The 3 months correlation between ECHO and STMicroelectronics is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding ECHO INVESTMENT ZY and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and ECHO INVESTMENT 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 ECHO INVESTMENT ZY are associated (or correlated) with STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of ECHO INVESTMENT i.e., ECHO INVESTMENT and STMicroelectronics go up and down completely randomly.

Pair Corralation between ECHO INVESTMENT and STMicroelectronics

Assuming the 90 days horizon ECHO INVESTMENT ZY is expected to generate 0.51 times more return on investment than STMicroelectronics. However, ECHO INVESTMENT ZY is 1.95 times less risky than STMicroelectronics. It trades about 0.13 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.0 per unit of risk. If you would invest  107.00  in ECHO INVESTMENT ZY on May 19, 2025 and sell it today you would earn a total of  16.00  from holding ECHO INVESTMENT ZY or generate 14.95% return on investment over 90 days.

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

ECHO INVESTMENT ZY  vs.  STMicroelectronics NV

ECHO INVESTMENT ZY

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in ECHO INVESTMENT ZY are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ECHO INVESTMENT reported solid returns over the last few months and may actually be approaching a breakup point.

STMicroelectronics

Risk-Adjusted Performance

Weakest

Over the last 90 days STMicroelectronics NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, STMicroelectronics is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ECHO INVESTMENT and STMicroelectronics

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

The idea behind ECHO INVESTMENT ZY and STMicroelectronics NV 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.