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

0.67

Correlation Coefficient

Intel  STMicroelectronics

Poor diversification

The 3 months correlation between Intel and STMicroelectronics is 0.67. 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 10.12 times less return on investment than STMicroelectronics. But when comparing it to its historical volatility, Intel is 1.42 times less risky than STMicroelectronics. It trades about 0.02 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,993  in STMicroelectronics NV on April 27, 2025 and sell it today you would earn a total of  676.00  from holding STMicroelectronics NV or generate 33.92% 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

Intel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Intel is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

STMicroelectronics

Risk-Adjusted Performance

OK

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

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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.