Correlation Between EMCORE and Silicon Laboratories
Can any of the company-specific risk be diversified away by investing in both EMCORE and Silicon Laboratories 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 EMCORE and Silicon Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCORE and Silicon Laboratories, you can compare the effects of market volatilities on EMCORE and Silicon Laboratories 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 EMCORE with a short position of Silicon Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCORE and Silicon Laboratories.
Diversification Opportunities for EMCORE and Silicon Laboratories
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between EMCORE and Silicon is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding EMCORE and Silicon Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Laboratories and EMCORE 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 EMCORE are associated (or correlated) with Silicon Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Laboratories has no effect on the direction of EMCORE i.e., EMCORE and Silicon Laboratories go up and down completely randomly.
Pair Corralation between EMCORE and Silicon Laboratories
Given the investment horizon of 90 days EMCORE is expected to generate 1.73 times more return on investment than Silicon Laboratories. However, EMCORE is 1.73 times more volatile than Silicon Laboratories. It trades about 0.27 of its potential returns per unit of risk. Silicon Laboratories is currently generating about -0.01 per unit of risk. If you would invest 213.00 in EMCORE on August 27, 2024 and sell it today you would earn a total of 87.00 from holding EMCORE or generate 40.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMCORE vs. Silicon Laboratories
Performance |
| Timeline |
| EMCORE |
| Silicon Laboratories |
EMCORE and Silicon Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCORE and Silicon Laboratories
The main advantage of trading using opposite EMCORE and Silicon Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCORE position performs unexpectedly, Silicon Laboratories 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 Laboratories will offset losses from the drop in Silicon Laboratories' long position.The idea behind EMCORE and Silicon Laboratories 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 Laboratories vs. Diodes Incorporated | Silicon Laboratories vs. MACOM Technology Solutions | Silicon Laboratories vs. FormFactor | Silicon Laboratories vs. Amkor Technology |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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