Correlation Between Aberdeen Diversified and STMicroelectronics

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

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

Diversification Opportunities for Aberdeen Diversified and STMicroelectronics

0.74

Correlation Coefficient

Aberdeen Diversified  STMicroelectronics

Poor diversification

The 3 months correlation between Aberdeen and STMicroelectronics is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Diversified Income and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Aberdeen Diversified 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 Aberdeen Diversified Income 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 Aberdeen Diversified i.e., Aberdeen Diversified and STMicroelectronics go up and down completely randomly.

Pair Corralation between Aberdeen Diversified and STMicroelectronics

Assuming the 90 days trading horizon Aberdeen Diversified is expected to generate 4.15 times less return on investment than STMicroelectronics. But when comparing it to its historical volatility, Aberdeen Diversified Income is 3.15 times less risky than STMicroelectronics. It trades about 0.2 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,746  in STMicroelectronics NV on April 22, 2025 and sell it today you would earn a total of  1,027  from holding STMicroelectronics NV or generate 58.82% return on investment over 90 days.

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

Aberdeen Diversified Income  vs.  STMicroelectronics NV

Aberdeen Diversified

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Diversified Income are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Aberdeen Diversified may actually be approaching a critical reversion point that can send shares even higher in August 2025.

STMicroelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, STMicroelectronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aberdeen Diversified and STMicroelectronics

The main advantage of trading using opposite Aberdeen Diversified and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aberdeen Diversified 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 Aberdeen Diversified Income 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.