Correlation Between DEUTSCHE BOERSE and Silicon Motion

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Can any of the company-specific risk be diversified away by investing in both DEUTSCHE BOERSE and Silicon Motion 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 DEUTSCHE BOERSE and Silicon Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DEUTSCHE BOERSE ADR and Silicon Motion Technology, you can compare the effects of market volatilities on DEUTSCHE BOERSE and Silicon Motion 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 DEUTSCHE BOERSE with a short position of Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of DEUTSCHE BOERSE and Silicon Motion.

Diversification Opportunities for DEUTSCHE BOERSE and Silicon Motion

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between DEUTSCHE and Silicon is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding DEUTSCHE BOERSE ADR and Silicon Motion Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Motion Technology and DEUTSCHE BOERSE 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 DEUTSCHE BOERSE ADR are associated (or correlated) with Silicon Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Motion Technology has no effect on the direction of DEUTSCHE BOERSE i.e., DEUTSCHE BOERSE and Silicon Motion go up and down completely randomly.

Pair Corralation between DEUTSCHE BOERSE and Silicon Motion

Assuming the 90 days trading horizon DEUTSCHE BOERSE is expected to generate 3.06 times less return on investment than Silicon Motion. But when comparing it to its historical volatility, DEUTSCHE BOERSE ADR is 2.57 times less risky than Silicon Motion. It trades about 0.17 of its potential returns per unit of risk. Silicon Motion Technology is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,791  in Silicon Motion Technology on September 13, 2024 and sell it today you would earn a total of  559.00  from holding Silicon Motion Technology or generate 11.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

DEUTSCHE BOERSE ADR  vs.  Silicon Motion Technology

 Performance 
       Timeline  
DEUTSCHE BOERSE ADR 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in DEUTSCHE BOERSE ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, DEUTSCHE BOERSE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.
Silicon Motion Technology 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Motion Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Silicon Motion is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

DEUTSCHE BOERSE and Silicon Motion Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DEUTSCHE BOERSE and Silicon Motion

The main advantage of trading using opposite DEUTSCHE BOERSE and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DEUTSCHE BOERSE position performs unexpectedly, Silicon Motion 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 Motion will offset losses from the drop in Silicon Motion's long position.
The idea behind DEUTSCHE BOERSE ADR and Silicon Motion Technology 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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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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