Correlation Between STMicroelectronics and Silicon Laboratories

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

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

Diversification Opportunities for STMicroelectronics and Silicon Laboratories

0.73

Correlation Coefficient

STMicroelectronics  Silicon Laboratories

Poor diversification

The 3 months correlation between STMicroelectronics and Silicon is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Silicon Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Laboratories 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 are associated (or correlated) with Silicon Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Laboratories has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Silicon Laboratories go up and down completely randomly.

Pair Corralation between STMicroelectronics and Silicon Laboratories

Assuming the 90 days horizon STMicroelectronics NV is expected to generate 1.41 times more return on investment than Silicon Laboratories. However, STMicroelectronics is 1.41 times more volatile than Silicon Laboratories. It trades about 0.06 of its potential returns per unit of risk. Silicon Laboratories is currently generating about 0.0 per unit of risk. If you would invest  2,392  in STMicroelectronics NV on May 15, 2025 and sell it today you would earn a total of  203.00  from holding STMicroelectronics NV or generate 8.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

STMicroelectronics NV  vs.  Silicon Laboratories

STMicroelectronics

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 4 (%) 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.

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.

Pair Trading with STMicroelectronics and Silicon Laboratories

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

The idea behind STMicroelectronics NV and Silicon Laboratories 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.