Correlation Between AOI Electronics and STMicroelectronics

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

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

Diversification Opportunities for AOI Electronics and STMicroelectronics

0.09

Correlation Coefficient

AOI Electronics  STMicroelectronics

Significant diversification

The 3 months correlation between AOI and STMicroelectronics is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding AOI Electronics Co and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and AOI Electronics 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 AOI Electronics 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 AOI Electronics i.e., AOI Electronics and STMicroelectronics go up and down completely randomly.

Pair Corralation between AOI Electronics and STMicroelectronics

Assuming the 90 days trading horizon AOI Electronics Co is expected to generate 0.04 times more return on investment than STMicroelectronics. However, AOI Electronics Co is 27.47 times less risky than STMicroelectronics. It trades about 0.13 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.03 per unit of risk. If you would invest  1,854  in AOI Electronics Co on August 14, 2025 and sell it today you would earn a total of  14.00  from holding AOI Electronics Co or generate 0.76% return on investment over 90 days.

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

AOI Electronics Co  vs.  STMicroelectronics NV

AOI Electronics

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in AOI Electronics Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AOI Electronics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AOI Electronics and STMicroelectronics

The main advantage of trading using opposite AOI Electronics and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AOI Electronics 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 AOI Electronics 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.