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
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STMicroelectronics and Silicon is 0.62. 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 under-perform the Silicon Laboratories. But the pink sheet apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.06 times less risky than Silicon Laboratories. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Silicon Laboratories is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 11,511 in Silicon Laboratories on August 28, 2024 and sell it today you would lose (305.00) from holding Silicon Laboratories or give up 2.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Silicon Laboratories
Performance |
| Timeline |
| STMicroelectronics |
| Silicon Laboratories |
STMicroelectronics and Silicon Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
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.| STMicroelectronics vs. Silicon Laboratories | STMicroelectronics vs. Power Integrations | STMicroelectronics vs. Diodes Incorporated | STMicroelectronics vs. MaxLinear |
| Silicon Laboratories vs. Diodes Incorporated | Silicon Laboratories vs. MACOM Technology Solutions | Silicon Laboratories vs. FormFactor | Silicon Laboratories vs. Amkor Technology |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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