Correlation Between ASE Industrial and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both ASE Industrial 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 ASE Industrial and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASE Industrial Holding and STMicroelectronics NV ADR, you can compare the effects of market volatilities on ASE Industrial 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 ASE Industrial with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and STMicroelectronics.
Diversification Opportunities for ASE Industrial and STMicroelectronics
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ASE and STMicroelectronics is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and STMicroelectronics NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics NV ADR and ASE Industrial 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 ASE Industrial Holding 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 NV ADR has no effect on the direction of ASE Industrial i.e., ASE Industrial and STMicroelectronics go up and down completely randomly.
Pair Corralation between ASE Industrial and STMicroelectronics
Considering the 90-day investment horizon ASE Industrial is expected to generate 1.59 times less return on investment than STMicroelectronics. But when comparing it to its historical volatility, ASE Industrial Holding is 1.45 times less risky than STMicroelectronics. It trades about 0.19 of its potential returns per unit of risk. STMicroelectronics NV ADR is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,321 in STMicroelectronics NV ADR on April 25, 2025 and sell it today you would earn a total of 856.00 from holding STMicroelectronics NV ADR or generate 36.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.39% |
Values | Daily Returns |
ASE Industrial Holding vs. STMicroelectronics NV ADR
Performance |
Timeline |
ASE Industrial Holding |
STMicroelectronics NV ADR |
ASE Industrial and STMicroelectronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ASE Industrial and STMicroelectronics
The main advantage of trading using opposite ASE Industrial and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASE Industrial 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.ASE Industrial vs. United Microelectronics | ASE Industrial vs. Amkor Technology | ASE Industrial vs. Himax Technologies | ASE Industrial vs. Chunghwa Telecom Co |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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