Correlation Between Guaranty Trust and STMicroelectronics

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

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

Diversification Opportunities for Guaranty Trust and STMicroelectronics

0.66

Correlation Coefficient

Guaranty Trust  STMicroelectronics

Poor diversification

The 3 months correlation between Guaranty and STMicroelectronics is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Guaranty Trust Holding and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Guaranty Trust 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 Guaranty Trust Holding 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 Guaranty Trust i.e., Guaranty Trust and STMicroelectronics go up and down completely randomly.

Pair Corralation between Guaranty Trust and STMicroelectronics

Assuming the 90 days trading horizon Guaranty Trust is expected to generate 1.28 times less return on investment than STMicroelectronics. In addition to that, Guaranty Trust is 1.95 times more volatile than STMicroelectronics NV. It trades about 0.08 of its total potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.19 per unit of volatility. If you would invest  1,975  in STMicroelectronics NV on April 24, 2025 and sell it today you would earn a total of  722.00  from holding STMicroelectronics NV or generate 36.56% return on investment over 90 days.

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

Guaranty Trust Holding  vs.  STMicroelectronics NV

Guaranty Trust Holding

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guaranty Trust Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Guaranty Trust unveiled solid returns over the last few months and may actually be approaching a breakup point.

STMicroelectronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, STMicroelectronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guaranty Trust and STMicroelectronics

The main advantage of trading using opposite Guaranty Trust and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guaranty Trust 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 Guaranty Trust Holding 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.

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.