Correlation Between STMicroelectronics and CHINA EDUCATION

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

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

Diversification Opportunities for STMicroelectronics and CHINA EDUCATION

0.32

Correlation Coefficient

STMicroelectronics  CHINA EDUCATION

Weak diversification

The 3 months correlation between STMicroelectronics and CHINA is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and CHINA EDUCATION GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA EDUCATION GROUP and STMicroelectronics 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 STMicroelectronics NV are associated (or correlated) with CHINA EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA EDUCATION GROUP has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and CHINA EDUCATION go up and down completely randomly.

Pair Corralation between STMicroelectronics and CHINA EDUCATION

Assuming the 90 days horizon STMicroelectronics is expected to generate 5.1 times less return on investment than CHINA EDUCATION. In addition to that, STMicroelectronics is 1.08 times more volatile than CHINA EDUCATION GROUP. It trades about 0.01 of its total potential returns per unit of risk. CHINA EDUCATION GROUP is currently generating about 0.07 per unit of volatility. If you would invest  27.00  in CHINA EDUCATION GROUP on May 17, 2025 and sell it today you would earn a total of  3.00  from holding CHINA EDUCATION GROUP or generate 11.11% return on investment over 90 days.

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

STMicroelectronics NV  vs.  CHINA EDUCATION GROUP

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.

CHINA EDUCATION GROUP

Risk-Adjusted Performance

Mild

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

Pair Trading with STMicroelectronics and CHINA EDUCATION

The main advantage of trading using opposite STMicroelectronics and CHINA EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, CHINA EDUCATION 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 CHINA EDUCATION will offset losses from the drop in CHINA EDUCATION's long position.

The idea behind STMicroelectronics NV and CHINA EDUCATION GROUP 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.