Correlation Between STMICROELECTRONICS and Axfood AB

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

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

Diversification Opportunities for STMICROELECTRONICS and Axfood AB

0.73

Correlation Coefficient

STMICROELECTRONICS  Axfood AB

Poor diversification

The 3 months correlation between STMICROELECTRONICS and Axfood is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and Axfood AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axfood AB 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 Axfood AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axfood AB has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and Axfood AB go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and Axfood AB

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to generate 1.3 times more return on investment than Axfood AB. However, STMICROELECTRONICS is 1.3 times more volatile than Axfood AB. It trades about 0.3 of its potential returns per unit of risk. Axfood AB is currently generating about 0.13 per unit of risk. If you would invest  1,765  in STMICROELECTRONICS on April 22, 2025 and sell it today you would earn a total of  1,007  from holding STMICROELECTRONICS or generate 57.05% return on investment over 90 days.

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

STMICROELECTRONICS  vs.  Axfood AB

STMICROELECTRONICS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMICROELECTRONICS are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, STMICROELECTRONICS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Axfood AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axfood AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Axfood AB reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMICROELECTRONICS and Axfood AB

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

The idea behind STMICROELECTRONICS and Axfood AB 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.