Correlation Between Elan Microelectronics and Silicon Integrated
Can any of the company-specific risk be diversified away by investing in both Elan Microelectronics and Silicon Integrated 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 Elan Microelectronics and Silicon Integrated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elan Microelectronics Corp and Silicon Integrated Systems, you can compare the effects of market volatilities on Elan Microelectronics and Silicon Integrated 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 Elan Microelectronics with a short position of Silicon Integrated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elan Microelectronics and Silicon Integrated.
Diversification Opportunities for Elan Microelectronics and Silicon Integrated
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Elan and Silicon is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Elan Microelectronics Corp and Silicon Integrated Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Integrated and Elan Microelectronics 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 Elan Microelectronics Corp are associated (or correlated) with Silicon Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Integrated has no effect on the direction of Elan Microelectronics i.e., Elan Microelectronics and Silicon Integrated go up and down completely randomly.
Pair Corralation between Elan Microelectronics and Silicon Integrated
Assuming the 90 days trading horizon Elan Microelectronics is expected to generate 2.95 times less return on investment than Silicon Integrated. But when comparing it to its historical volatility, Elan Microelectronics Corp is 2.22 times less risky than Silicon Integrated. It trades about 0.06 of its potential returns per unit of risk. Silicon Integrated Systems is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,875 in Silicon Integrated Systems on November 28, 2024 and sell it today you would earn a total of 4,905 from holding Silicon Integrated Systems or generate 261.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elan Microelectronics Corp vs. Silicon Integrated Systems
Performance |
| Timeline |
| Elan Microelectronics |
| Silicon Integrated |
Elan Microelectronics and Silicon Integrated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elan Microelectronics and Silicon Integrated
The main advantage of trading using opposite Elan Microelectronics and Silicon Integrated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elan Microelectronics position performs unexpectedly, Silicon Integrated 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 Integrated will offset losses from the drop in Silicon Integrated's long position.The idea behind Elan Microelectronics Corp and Silicon Integrated Systems 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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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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