Correlation Between Intel and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Intel and STMicroelectronics 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 Intel and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intel and STMicroelectronics NV, you can compare the effects of market volatilities on Intel and STMicroelectronics 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 Intel with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and STMicroelectronics.
Diversification Opportunities for Intel and STMicroelectronics
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Intel and STMicroelectronics is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Intel and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Intel 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 Intel are associated (or correlated) with STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Intel i.e., Intel and STMicroelectronics go up and down completely randomly.
Pair Corralation between Intel and STMicroelectronics
Given the investment horizon of 90 days Intel is expected to generate 5.36 times less return on investment than STMicroelectronics. But when comparing it to its historical volatility, Intel is 1.19 times less risky than STMicroelectronics. It trades about 0.06 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,993 in STMicroelectronics NV on April 24, 2025 and sell it today you would earn a total of 1,324 from holding STMicroelectronics NV or generate 66.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Intel vs. STMicroelectronics NV
Performance |
Timeline |
Intel |
STMicroelectronics |
Intel and STMicroelectronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Intel and STMicroelectronics
The main advantage of trading using opposite Intel and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.The idea behind Intel and STMicroelectronics NV 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.STMicroelectronics vs. Synaptics Incorporated | STMicroelectronics vs. MACOM Technology Solutions | STMicroelectronics vs. Silicon Laboratories | STMicroelectronics vs. Power Integrations |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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