Correlation Between Silicon Power and PlayNitride
Can any of the company-specific risk be diversified away by investing in both Silicon Power and PlayNitride 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 PlayNitride 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 PlayNitride, you can compare the effects of market volatilities on Silicon Power and PlayNitride 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 PlayNitride. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Power and PlayNitride.
Diversification Opportunities for Silicon Power and PlayNitride
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Silicon and PlayNitride is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Power Computer and PlayNitride in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PlayNitride 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 PlayNitride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PlayNitride has no effect on the direction of Silicon Power i.e., Silicon Power and PlayNitride go up and down completely randomly.
Pair Corralation between Silicon Power and PlayNitride
Assuming the 90 days trading horizon Silicon Power Computer is expected to under-perform the PlayNitride. But the stock apears to be less risky and, when comparing its historical volatility, Silicon Power Computer is 2.93 times less risky than PlayNitride. The stock trades about -0.08 of its potential returns per unit of risk. The PlayNitride is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 15,450 in PlayNitride on November 3, 2024 and sell it today you would earn a total of 5,850 from holding PlayNitride or generate 37.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Silicon Power Computer vs. PlayNitride
Performance |
| Timeline |
| Silicon Power Computer |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| PlayNitride |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Silicon Power and PlayNitride Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicon Power and PlayNitride
The main advantage of trading using opposite Silicon Power and PlayNitride positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Power position performs unexpectedly, PlayNitride 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 PlayNitride will offset losses from the drop in PlayNitride's long position.The idea behind Silicon Power Computer and PlayNitride 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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