Correlation Between Silicon Laboratories and STMicroelectronics

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

By analyzing existing cross correlation between Silicon Laboratories and STMicroelectronics NV, you can compare the effects of market volatilities on Silicon Laboratories 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 Silicon Laboratories with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Laboratories and STMicroelectronics.

Diversification Opportunities for Silicon Laboratories and STMicroelectronics

0.71

Correlation Coefficient

Silicon Laboratories  STMicroelectronics

Poor diversification

The 3 months correlation between Silicon and STMicroelectronics is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Laboratories and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Silicon Laboratories 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 Silicon Laboratories 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 Silicon Laboratories i.e., Silicon Laboratories and STMicroelectronics go up and down completely randomly.

Pair Corralation between Silicon Laboratories and STMicroelectronics

Given the investment horizon of 90 days Silicon Laboratories is expected to generate 6.54 times less return on investment than STMicroelectronics. But when comparing it to its historical volatility, Silicon Laboratories is 1.37 times less risky than STMicroelectronics. It trades about 0.01 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,384  in STMicroelectronics NV on May 12, 2025 and sell it today you would earn a total of  114.00  from holding STMicroelectronics NV or generate 4.78% return on investment over 90 days.

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

Silicon Laboratories  vs.  STMicroelectronics NV

Silicon Laboratories

Risk-Adjusted Performance

Weakest

Over the last 90 days Silicon Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Silicon Laboratories is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

STMicroelectronics

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, STMicroelectronics may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Silicon Laboratories and STMicroelectronics

The main advantage of trading using opposite Silicon Laboratories and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Laboratories 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 Silicon Laboratories 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..