Correlation Between STMicroelectronics and GAMES OPERATORS

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

By analyzing existing cross correlation between STMicroelectronics NV and GAMES OPERATORS SA, you can compare the effects of market volatilities on STMicroelectronics and GAMES OPERATORS 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 GAMES OPERATORS. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and GAMES OPERATORS.

Diversification Opportunities for STMicroelectronics and GAMES OPERATORS

0.45

Correlation Coefficient

STMicroelectronics  GAMES OPERATORS

Very weak diversification

The 3 months correlation between STMicroelectronics and GAMES is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and GAMES OPERATORS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMES OPERATORS SA 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 NV are associated (or correlated) with GAMES OPERATORS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMES OPERATORS SA has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and GAMES OPERATORS go up and down completely randomly.

Pair Corralation between STMicroelectronics and GAMES OPERATORS

Assuming the 90 days horizon STMicroelectronics NV is expected to generate 1.23 times more return on investment than GAMES OPERATORS. However, STMicroelectronics is 1.23 times more volatile than GAMES OPERATORS SA. It trades about 0.25 of its potential returns per unit of risk. GAMES OPERATORS SA is currently generating about 0.04 per unit of risk. If you would invest  1,800  in STMicroelectronics NV on April 20, 2025 and sell it today you would earn a total of  971.00  from holding STMicroelectronics NV or generate 53.94% return on investment over 90 days.

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

STMicroelectronics NV  vs.  GAMES OPERATORS SA

STMicroelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 19 (%) 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.

GAMES OPERATORS SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GAMES OPERATORS SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GAMES OPERATORS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with STMicroelectronics and GAMES OPERATORS

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

The idea behind STMicroelectronics NV and GAMES OPERATORS SA 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.