Correlation Between CNH Industrial and STMicroelectronics

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

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

Diversification Opportunities for CNH Industrial and STMicroelectronics

0.56

Correlation Coefficient

CNH Industrial  STMicroelectronics

Very weak diversification

The 3 months correlation between CNH and STMicroelectronics is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding CNH Industrial NV and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and CNH Industrial 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 CNH Industrial NV 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 CNH Industrial i.e., CNH Industrial and STMicroelectronics go up and down completely randomly.

Pair Corralation between CNH Industrial and STMicroelectronics

Assuming the 90 days trading horizon CNH Industrial is expected to generate 3.99 times less return on investment than STMicroelectronics. But when comparing it to its historical volatility, CNH Industrial NV is 1.09 times less risky than STMicroelectronics. It trades about 0.06 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,975  in STMicroelectronics NV on April 24, 2025 and sell it today you would earn a total of  839.00  from holding STMicroelectronics NV or generate 42.48% return on investment over 90 days.

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

CNH Industrial NV  vs.  STMicroelectronics NV

CNH Industrial NV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CNH Industrial NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CNH Industrial may actually be approaching a critical reversion point that can send shares even higher in August 2025.

STMicroelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 17 (%) 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.

Pair Trading with CNH Industrial and STMicroelectronics

The main advantage of trading using opposite CNH Industrial and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNH Industrial 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 CNH Industrial NV 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.