Correlation Between Summit Materials and Silicon Motion
Can any of the company-specific risk be diversified away by investing in both Summit Materials 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 Summit Materials and Silicon Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Silicon Motion Technology, you can compare the effects of market volatilities on Summit Materials 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 Summit Materials with a short position of Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Silicon Motion.
Diversification Opportunities for Summit Materials and Silicon Motion
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Summit and Silicon is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials 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 Summit Materials 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 Summit Materials 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 Summit Materials i.e., Summit Materials and Silicon Motion go up and down completely randomly.
Pair Corralation between Summit Materials and Silicon Motion
Assuming the 90 days trading horizon Summit Materials is expected to generate 0.35 times more return on investment than Silicon Motion. However, Summit Materials is 2.85 times less risky than Silicon Motion. It trades about 0.08 of its potential returns per unit of risk. Silicon Motion Technology is currently generating about -0.01 per unit of risk. If you would invest 4,940 in Summit Materials on November 3, 2024 and sell it today you would earn a total of 60.00 from holding Summit Materials or generate 1.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials vs. Silicon Motion Technology
Performance |
| Timeline |
| Summit Materials |
| Silicon Motion Technology |
Summit Materials and Silicon Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Silicon Motion
The main advantage of trading using opposite Summit Materials and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials 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.| Summit Materials vs. SIVERS SEMICONDUCTORS AB | Summit Materials vs. NorAm Drilling AS | Summit Materials vs. Volkswagen AG | Summit Materials vs. Darden Restaurants |
| Silicon Motion vs. BE Semiconductor Industries | Silicon Motion vs. Taiwan Semiconductor Manufacturing | Silicon Motion vs. National Retail Properties | Silicon Motion vs. Salesforce |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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