Correlation Between ISPD Network and STMicroelectronics

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

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

Diversification Opportunities for ISPD Network and STMicroelectronics

-0.95

Correlation Coefficient

ISPD Network  STMicroelectronics

Pay attention - limited upside

The 3 months correlation between ISPD and STMicroelectronics is -0.95. Overlapping area represents the amount of risk that can be diversified away by holding ISPD Network SA and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and ISPD Network 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 ISPD Network SA 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 ISPD Network i.e., ISPD Network and STMicroelectronics go up and down completely randomly.

Pair Corralation between ISPD Network and STMicroelectronics

Assuming the 90 days trading horizon ISPD Network SA is expected to under-perform the STMicroelectronics. But the stock apears to be less risky and, when comparing its historical volatility, ISPD Network SA is 1.1 times less risky than STMicroelectronics. The stock trades about -0.19 of its potential returns per unit of risk. The STMicroelectronics NV is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,809  in STMicroelectronics NV on April 21, 2025 and sell it today you would earn a total of  989.00  from holding STMicroelectronics NV or generate 54.67% return on investment over 90 days.

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

ISPD Network SA  vs.  STMicroelectronics NV

ISPD Network SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days ISPD Network SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in August 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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. Even with relatively weak basic indicators, STMicroelectronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ISPD Network and STMicroelectronics

The main advantage of trading using opposite ISPD Network and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ISPD Network 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 ISPD Network SA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.