Correlation Between Silicon Power and Elitegroup Computer
Can any of the company-specific risk be diversified away by investing in both Silicon Power and Elitegroup Computer 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 Silicon Power and Elitegroup Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silicon Power Computer and Elitegroup Computer Systems, you can compare the effects of market volatilities on Silicon Power and Elitegroup Computer 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 Silicon Power with a short position of Elitegroup Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Power and Elitegroup Computer.
Diversification Opportunities for Silicon Power and Elitegroup Computer
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Silicon and Elitegroup is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Power Computer and Elitegroup Computer Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elitegroup Computer and Silicon Power 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 Silicon Power Computer are associated (or correlated) with Elitegroup Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elitegroup Computer has no effect on the direction of Silicon Power i.e., Silicon Power and Elitegroup Computer go up and down completely randomly.
Pair Corralation between Silicon Power and Elitegroup Computer
Assuming the 90 days trading horizon Silicon Power Computer is expected to generate 0.44 times more return on investment than Elitegroup Computer. However, Silicon Power Computer is 2.29 times less risky than Elitegroup Computer. It trades about 0.25 of its potential returns per unit of risk. Elitegroup Computer Systems is currently generating about 0.08 per unit of risk. If you would invest 3,045 in Silicon Power Computer on November 4, 2024 and sell it today you would earn a total of 100.00 from holding Silicon Power Computer or generate 3.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Silicon Power Computer vs. Elitegroup Computer Systems
Performance |
| Timeline |
| Silicon Power Computer |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Elitegroup Computer |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Silicon Power and Elitegroup Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicon Power and Elitegroup Computer
The main advantage of trading using opposite Silicon Power and Elitegroup Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Power position performs unexpectedly, Elitegroup Computer 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 Elitegroup Computer will offset losses from the drop in Elitegroup Computer's long position.The idea behind Silicon Power Computer and Elitegroup Computer 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.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.
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