Correlation Between PARKEN Sport and Silicon Motion
Can any of the company-specific risk be diversified away by investing in both PARKEN Sport 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 PARKEN Sport and Silicon Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PARKEN Sport Entertainment and Silicon Motion Technology, you can compare the effects of market volatilities on PARKEN Sport 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 PARKEN Sport with a short position of Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of PARKEN Sport and Silicon Motion.
Diversification Opportunities for PARKEN Sport and Silicon Motion
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between PARKEN and Silicon is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding PARKEN Sport Entertainment 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 PARKEN Sport 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 PARKEN Sport Entertainment 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 PARKEN Sport i.e., PARKEN Sport and Silicon Motion go up and down completely randomly.
Pair Corralation between PARKEN Sport and Silicon Motion
Assuming the 90 days horizon PARKEN Sport Entertainment is expected to under-perform the Silicon Motion. But the stock apears to be less risky and, when comparing its historical volatility, PARKEN Sport Entertainment is 1.72 times less risky than Silicon Motion. The stock trades about -0.02 of its potential returns per unit of risk. The Silicon Motion Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,772 in Silicon Motion Technology on September 3, 2024 and sell it today you would earn a total of 148.00 from holding Silicon Motion Technology or generate 3.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PARKEN Sport Entertainment vs. Silicon Motion Technology
Performance |
| Timeline |
| PARKEN Sport Enterta |
| Silicon Motion Technology |
PARKEN Sport and Silicon Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PARKEN Sport and Silicon Motion
The main advantage of trading using opposite PARKEN Sport and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PARKEN Sport 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 PARKEN Sport Entertainment 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.| Silicon Motion vs. Apple Inc | Silicon Motion vs. Apple Inc | Silicon Motion vs. Apple Inc | Silicon Motion vs. Apple Inc |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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