Correlation Between Silicon Motion and Direct Line
Can any of the company-specific risk be diversified away by investing in both Silicon Motion and Direct Line 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 Silicon Motion and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silicon Motion Technology and Direct Line Insurance, you can compare the effects of market volatilities on Silicon Motion and Direct Line 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 Silicon Motion with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Motion and Direct Line.
Diversification Opportunities for Silicon Motion and Direct Line
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Silicon and Direct is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line Insurance and Silicon Motion 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 Silicon Motion Technology are associated (or correlated) with Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of Silicon Motion i.e., Silicon Motion and Direct Line go up and down completely randomly.
Pair Corralation between Silicon Motion and Direct Line
Assuming the 90 days trading horizon Silicon Motion is expected to generate 1.89 times less return on investment than Direct Line. In addition to that, Silicon Motion is 2.29 times more volatile than Direct Line Insurance. It trades about 0.03 of its total potential returns per unit of risk. Direct Line Insurance is currently generating about 0.14 per unit of volatility. If you would invest 299.00 in Direct Line Insurance on October 12, 2024 and sell it today you would earn a total of 11.00 from holding Direct Line Insurance or generate 3.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
Silicon Motion Technology vs. Direct Line Insurance
Performance |
| Timeline |
| Silicon Motion Technology |
| Direct Line Insurance |
Silicon Motion and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicon Motion and Direct Line
The main advantage of trading using opposite Silicon Motion and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Motion position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.| Silicon Motion vs. ONWARD MEDICAL BV | Silicon Motion vs. INDOFOOD AGRI RES | Silicon Motion vs. TYSON FOODS A | Silicon Motion vs. Lifeway Foods |
| Direct Line vs. Silicon Motion Technology | Direct Line vs. Sinopec Shanghai Petrochemical | Direct Line vs. Mitsui Chemicals | Direct Line vs. Diamyd Medical AB |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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