Correlation Between STMICROELECTRONICS and Magna International

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

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

Diversification Opportunities for STMICROELECTRONICS and Magna International

0.62

Correlation Coefficient

STMICROELECTRONICS  Magna International

Poor diversification

The 3 months correlation between STMICROELECTRONICS and Magna is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and Magna International go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and Magna International

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to generate 1.26 times more return on investment than Magna International. However, STMICROELECTRONICS is 1.26 times more volatile than Magna International. It trades about 0.31 of its potential returns per unit of risk. Magna International is currently generating about 0.23 per unit of risk. If you would invest  1,765  in STMICROELECTRONICS on April 20, 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.  Magna International

STMICROELECTRONICS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMICROELECTRONICS are ranked lower than 24 (%) 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.

Magna International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Magna International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMICROELECTRONICS and Magna International

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

The idea behind STMICROELECTRONICS and Magna International 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.