Correlation Between KCE Electronics and STMicroelectronics

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

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

Diversification Opportunities for KCE Electronics and STMicroelectronics

0.65

Correlation Coefficient

KCE Electronics  STMicroelectronics

Poor diversification

The 3 months correlation between KCE and STMicroelectronics is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding KCE Electronics Public and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and KCE 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 KCE Electronics Public 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 KCE Electronics i.e., KCE Electronics and STMicroelectronics go up and down completely randomly.

Pair Corralation between KCE Electronics and STMicroelectronics

Assuming the 90 days trading horizon KCE Electronics is expected to generate 1.63 times less return on investment than STMicroelectronics. But when comparing it to its historical volatility, KCE Electronics Public is 1.63 times less risky than STMicroelectronics. It trades about 0.26 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,805  in STMicroelectronics NV on April 13, 2025 and sell it today you would earn a total of  1,050  from holding STMicroelectronics NV or generate 58.17% return on investment over 90 days.

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

KCE Electronics Public  vs.  STMicroelectronics NV

KCE Electronics Public

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KCE Electronics Public are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, KCE Electronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

STMicroelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, STMicroelectronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KCE Electronics and STMicroelectronics

The main advantage of trading using opposite KCE Electronics and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KCE 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 KCE Electronics Public 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.