Correlation Between Diamyd Medical and STMicroelectronics

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

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

Diversification Opportunities for Diamyd Medical and STMicroelectronics

0.43

Correlation Coefficient

Diamyd Medical  STMicroelectronics

Very weak diversification

The 3 months correlation between Diamyd and STMicroelectronics is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Diamyd Medical AB and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Diamyd Medical 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 Diamyd Medical AB 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 Diamyd Medical i.e., Diamyd Medical and STMicroelectronics go up and down completely randomly.

Pair Corralation between Diamyd Medical and STMicroelectronics

Assuming the 90 days horizon Diamyd Medical AB is expected to generate 0.87 times more return on investment than STMicroelectronics. However, Diamyd Medical AB is 1.15 times less risky than STMicroelectronics. It trades about 0.12 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.07 per unit of risk. If you would invest  80.00  in Diamyd Medical AB on May 1, 2025 and sell it today you would earn a total of  18.00  from holding Diamyd Medical AB or generate 22.5% return on investment over 90 days.

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

Diamyd Medical AB  vs.  STMicroelectronics NV

Diamyd Medical AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diamyd Medical AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Diamyd Medical reported solid returns over the last few months and may actually be approaching a breakup point.

STMicroelectronics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, STMicroelectronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diamyd Medical and STMicroelectronics

The main advantage of trading using opposite Diamyd Medical and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamyd Medical 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 Diamyd Medical AB 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.