Correlation Between STMicroelectronics and Qualcomm

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

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

Diversification Opportunities for STMicroelectronics and Qualcomm

0.72

Correlation Coefficient

STMicroelectronics  Qualcomm

Poor diversification

The 3 months correlation between STMicroelectronics and Qualcomm is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Qualcomm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qualcomm 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 Qualcomm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qualcomm has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Qualcomm go up and down completely randomly.

Pair Corralation between STMicroelectronics and Qualcomm

Assuming the 90 days trading horizon STMicroelectronics NV is expected to generate 1.36 times more return on investment than Qualcomm. However, STMicroelectronics is 1.36 times more volatile than Qualcomm. It trades about 0.24 of its potential returns per unit of risk. Qualcomm is currently generating about 0.09 per unit of risk. If you would invest  11,885  in STMicroelectronics NV on April 20, 2025 and sell it today you would earn a total of  5,647  from holding STMicroelectronics NV or generate 47.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

STMicroelectronics NV  vs.  Qualcomm

STMicroelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, STMicroelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Qualcomm

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qualcomm are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qualcomm may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with STMicroelectronics and Qualcomm

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

The idea behind STMicroelectronics NV and Qualcomm 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.