Correlation Between Stmicroelectronics and Hexcel Corp

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Can any of the company-specific risk be diversified away by investing in both Stmicroelectronics and Hexcel Corp 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 Hexcel Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stmicroelectronics NV ADR and Hexcel Corp, you can compare the effects of market volatilities on Stmicroelectronics and Hexcel Corp 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 Hexcel Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stmicroelectronics and Hexcel Corp.

Diversification Opportunities for Stmicroelectronics and Hexcel Corp

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Stmicroelectronics and Hexcel is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Stmicroelectronics NV ADR and Hexcel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexcel Corp 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 ADR are associated (or correlated) with Hexcel Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexcel Corp has no effect on the direction of Stmicroelectronics i.e., Stmicroelectronics and Hexcel Corp go up and down completely randomly.

Pair Corralation between Stmicroelectronics and Hexcel Corp

Considering the 90-day investment horizon Stmicroelectronics NV ADR is expected to under-perform the Hexcel Corp. In addition to that, Stmicroelectronics is 1.06 times more volatile than Hexcel Corp. It trades about -0.01 of its total potential returns per unit of risk. Hexcel Corp is currently generating about 0.01 per unit of volatility. If you would invest  5,652  in Hexcel Corp on July 1, 2022 and sell it today you would lose (276.00)  from holding Hexcel Corp or give up 4.88% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Stmicroelectronics NV ADR  vs.  Hexcel Corp

 Performance (%) 
       Timeline  
Stmicroelectronics NV ADR 
Stmicroelectronics Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Stmicroelectronics NV ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Stmicroelectronics may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Stmicroelectronics Price Channel

Hexcel Corp 
Hexcel Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Hexcel Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Hexcel Corp is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Hexcel Price Channel

Stmicroelectronics and Hexcel Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Stmicroelectronics and Hexcel Corp

The main advantage of trading using opposite Stmicroelectronics and Hexcel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stmicroelectronics position performs unexpectedly, Hexcel Corp 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 Hexcel Corp will offset losses from the drop in Hexcel Corp's long position.
Stmicroelectronics vs. Amazon Inc
The idea behind Stmicroelectronics NV ADR and Hexcel Corp 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.
Hexcel Corp vs. Amazon Inc
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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