Correlation Between STMicroelectronics and Cars

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

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

Diversification Opportunities for STMicroelectronics and Cars

0.17

Correlation Coefficient

STMicroelectronics  Cars

Average diversification

The 3 months correlation between STMicroelectronics and Cars is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Cars go up and down completely randomly.

Pair Corralation between STMicroelectronics and Cars

Assuming the 90 days trading horizon STMicroelectronics NV is expected to generate 0.94 times more return on investment than Cars. However, STMicroelectronics NV is 1.07 times less risky than Cars. It trades about 0.27 of its potential returns per unit of risk. Cars Inc is currently generating about 0.1 per unit of risk. If you would invest  1,746  in STMicroelectronics NV on April 20, 2025 and sell it today you would earn a total of  1,027  from holding STMicroelectronics NV or generate 58.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.65%
Values	Daily Returns

STMicroelectronics NV  vs.  Cars Inc

STMicroelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, STMicroelectronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cars Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cars unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and Cars

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

The idea behind STMicroelectronics NV and Cars Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.