Correlation Between Telefonaktiebolaget and Silicon Motion
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget 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 Telefonaktiebolaget and Silicon Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telefonaktiebolaget LM Ericsson and Silicon Motion Technology, you can compare the effects of market volatilities on Telefonaktiebolaget 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 Telefonaktiebolaget with a short position of Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and Silicon Motion.
Diversification Opportunities for Telefonaktiebolaget and Silicon Motion
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Telefonaktiebolaget and Silicon is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso 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 Telefonaktiebolaget 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 Telefonaktiebolaget LM Ericsson 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 Telefonaktiebolaget i.e., Telefonaktiebolaget and Silicon Motion go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and Silicon Motion
Given the investment horizon of 90 days Telefonaktiebolaget LM Ericsson is expected to generate 0.83 times more return on investment than Silicon Motion. However, Telefonaktiebolaget LM Ericsson is 1.2 times less risky than Silicon Motion. It trades about 0.12 of its potential returns per unit of risk. Silicon Motion Technology is currently generating about 0.02 per unit of risk. If you would invest 484.00 in Telefonaktiebolaget LM Ericsson on September 14, 2024 and sell it today you would earn a total of 343.50 from holding Telefonaktiebolaget LM Ericsson or generate 70.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. Silicon Motion Technology
Performance |
| Timeline |
| Telefonaktiebolaget |
| Silicon Motion Technology |
Telefonaktiebolaget and Silicon Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and Silicon Motion
The main advantage of trading using opposite Telefonaktiebolaget and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget 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.| Telefonaktiebolaget vs. Nokia Corp ADR | Telefonaktiebolaget vs. Marvell Technology Group | Telefonaktiebolaget vs. Qorvo Inc | Telefonaktiebolaget vs. Skyworks Solutions |
| Silicon Motion vs. ON Semiconductor | Silicon Motion vs. Globalfoundries | Silicon Motion vs. Wisekey International Holding | Silicon Motion vs. Nano Labs |
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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