Correlation Between Middlefield Banc and STMicroelectronics

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

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

Diversification Opportunities for Middlefield Banc and STMicroelectronics

0.76

Correlation Coefficient

Middlefield Banc  STMicroelectronics

Poor diversification

The 3 months correlation between Middlefield and STMicroelectronics is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Middlefield Banc 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 Middlefield Banc 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 Middlefield Banc 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 Middlefield Banc i.e., Middlefield Banc and STMicroelectronics go up and down completely randomly.

Pair Corralation between Middlefield Banc and STMicroelectronics

Given the investment horizon of 90 days Middlefield Banc is expected to generate 1.22 times less return on investment than STMicroelectronics. But when comparing it to its historical volatility, Middlefield Banc is 1.42 times less risky than STMicroelectronics. It trades about 0.11 of its potential returns per unit of risk. STMicroelectronics NV ADR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,291  in STMicroelectronics NV ADR on April 29, 2025 and sell it today you would earn a total of  378.00  from holding STMicroelectronics NV ADR or generate 16.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Middlefield Banc  vs.  STMicroelectronics NV ADR

Middlefield Banc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Middlefield Banc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Middlefield Banc displayed solid returns over the last few months and may actually be approaching a breakup point.

STMicroelectronics NV ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, STMicroelectronics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Middlefield Banc and STMicroelectronics

The main advantage of trading using opposite Middlefield Banc and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Middlefield Banc 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 Middlefield Banc and STMicroelectronics NV ADR 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.