Correlation Between STMICROELECTRONICS and KIMBALL ELECTRONICS

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

By analyzing existing cross correlation between STMICROELECTRONICS and KIMBALL ELECTRONICS, you can compare the effects of market volatilities on STMICROELECTRONICS and KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMICROELECTRONICS and KIMBALL ELECTRONICS.

Diversification Opportunities for STMICROELECTRONICS and KIMBALL ELECTRONICS

0.86

Correlation Coefficient

STMICROELECTRONICS  KIMBALL ELECTRONICS

Very poor diversification

The 3 months correlation between STMICROELECTRONICS and KIMBALL is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and KIMBALL ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIMBALL ELECTRONICS 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 are associated (or correlated) with KIMBALL ELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIMBALL ELECTRONICS has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and KIMBALL ELECTRONICS go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and KIMBALL ELECTRONICS

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to generate 0.65 times more return on investment than KIMBALL ELECTRONICS. However, STMICROELECTRONICS is 1.54 times less risky than KIMBALL ELECTRONICS. It trades about 0.29 of its potential returns per unit of risk. KIMBALL ELECTRONICS is currently generating about 0.16 per unit of risk. If you would invest  1,845  in STMICROELECTRONICS on April 23, 2025 and sell it today you would earn a total of  951.00  from holding STMICROELECTRONICS or generate 51.54% return on investment over 90 days.

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

STMICROELECTRONICS  vs.  KIMBALL ELECTRONICS

STMICROELECTRONICS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMICROELECTRONICS are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, STMICROELECTRONICS exhibited solid returns over the last few months and may actually be approaching a breakup point.

KIMBALL ELECTRONICS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KIMBALL ELECTRONICS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, KIMBALL ELECTRONICS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMICROELECTRONICS and KIMBALL ELECTRONICS

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

The idea behind STMICROELECTRONICS and KIMBALL ELECTRONICS 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.