Correlation Between ASE Industrial and Silicon Motion
Can any of the company-specific risk be diversified away by investing in both ASE Industrial 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 ASE Industrial and Silicon Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASE Industrial Holding and Silicon Motion Technology, you can compare the effects of market volatilities on ASE Industrial 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 ASE Industrial with a short position of Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and Silicon Motion.
Diversification Opportunities for ASE Industrial and Silicon Motion
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ASE and Silicon is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding 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 ASE Industrial 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 ASE Industrial Holding 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 ASE Industrial i.e., ASE Industrial and Silicon Motion go up and down completely randomly.
Pair Corralation between ASE Industrial and Silicon Motion
Considering the 90-day investment horizon ASE Industrial Holding is expected to generate 0.79 times more return on investment than Silicon Motion. However, ASE Industrial Holding is 1.26 times less risky than Silicon Motion. It trades about 0.06 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 604.00 in ASE Industrial Holding on August 27, 2024 and sell it today you would earn a total of 389.00 from holding ASE Industrial Holding or generate 64.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASE Industrial Holding vs. Silicon Motion Technology
Performance |
| Timeline |
| ASE Industrial Holding |
| Silicon Motion Technology |
ASE Industrial and Silicon Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASE Industrial and Silicon Motion
The main advantage of trading using opposite ASE Industrial and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASE Industrial 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.| ASE Industrial vs. United Microelectronics | ASE Industrial vs. Amkor Technology | ASE Industrial vs. Himax Technologies | ASE Industrial vs. Chunghwa Telecom Co |
| Silicon Motion vs. ASE Industrial Holding | Silicon Motion vs. United Microelectronics | Silicon Motion vs. ChipMOS Technologies | Silicon Motion vs. SemiLEDS |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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