Correlation Between Murata Manufacturing and STMicroelectronics

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

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

Diversification Opportunities for Murata Manufacturing and STMicroelectronics

0.34

Correlation Coefficient

Murata Manufacturing  STMicroelectronics

Weak diversification

The 3 months correlation between Murata and STMicroelectronics is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Murata Manufacturing Co and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Murata Manufacturing 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 Murata Manufacturing Co 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 Murata Manufacturing i.e., Murata Manufacturing and STMicroelectronics go up and down completely randomly.

Pair Corralation between Murata Manufacturing and STMicroelectronics

Assuming the 90 days horizon Murata Manufacturing Co is expected to generate 1.98 times more return on investment than STMicroelectronics. However, Murata Manufacturing is 1.98 times more volatile than STMicroelectronics NV. It trades about 0.08 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.13 per unit of risk. If you would invest  1,237  in Murata Manufacturing Co on May 1, 2025 and sell it today you would earn a total of  255.00  from holding Murata Manufacturing Co or generate 20.61% return on investment over 90 days.

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

Murata Manufacturing Co  vs.  STMicroelectronics NV

Murata Manufacturing

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Murata Manufacturing Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Murata Manufacturing reported solid returns over the last few months and may actually be approaching a breakup point.

STMicroelectronics

Risk-Adjusted Performance

OK

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

Pair Trading with Murata Manufacturing and STMicroelectronics

The main advantage of trading using opposite Murata Manufacturing and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Murata Manufacturing 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 Murata Manufacturing Co 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.