Correlation Between STMicroelectronics and Globalfoundries

Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Globalfoundries 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 Globalfoundries 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 Globalfoundries, you can compare the effects of market volatilities on STMicroelectronics and Globalfoundries 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 Globalfoundries. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Globalfoundries.

Diversification Opportunities for STMicroelectronics and Globalfoundries

0.75

Correlation Coefficient

STMicroelectronics  Globalfoundries

Poor diversification

The 3 months correlation between STMicroelectronics and Globalfoundries is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Globalfoundries go up and down completely randomly.

Pair Corralation between STMicroelectronics and Globalfoundries

Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to generate 1.49 times more return on investment than Globalfoundries. However, STMicroelectronics is 1.49 times more volatile than Globalfoundries. It trades about 0.06 of its potential returns per unit of risk. Globalfoundries is currently generating about 0.02 per unit of risk. If you would invest  2,290  in STMicroelectronics NV ADR on May 3, 2025 and sell it today you would earn a total of  216.00  from holding STMicroelectronics NV ADR or generate 9.43% return on investment over 90 days.

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

STMicroelectronics NV ADR  vs.  Globalfoundries

STMicroelectronics NV ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, STMicroelectronics displayed solid returns over the last few months and may actually be approaching a breakup point.

Globalfoundries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Globalfoundries is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with STMicroelectronics and Globalfoundries

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

The idea behind STMicroelectronics NV ADR and Globalfoundries 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.