Correlation Between RM Plc and STMicroelectronics

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

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

Diversification Opportunities for RM Plc and STMicroelectronics

-0.64

Correlation Coefficient

RM Plc  STMicroelectronics

Excellent diversification

The 3 months correlation between RM Plc and STMicroelectronics is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding RM Plc and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and RM Plc 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 RM Plc 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 RM Plc i.e., RM Plc and STMicroelectronics go up and down completely randomly.

Pair Corralation between RM Plc and STMicroelectronics

Assuming the 90 days trading horizon RM Plc is expected to generate 0.85 times more return on investment than STMicroelectronics. However, RM Plc is 1.17 times less risky than STMicroelectronics. It trades about 0.04 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.03 per unit of risk. If you would invest  10,500  in RM Plc on August 16, 2025 and sell it today you would earn a total of  400.00  from holding RM Plc or generate 3.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

RM Plc  vs.  STMicroelectronics NV

RM Plc

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in RM Plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, RM Plc is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 quite persistent essential indicators, STMicroelectronics is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with RM Plc and STMicroelectronics

The main advantage of trading using opposite RM Plc and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RM Plc 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 RM Plc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.