Correlation Between Silicon Motion and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Silicon Motion and Eastman Chemical 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 Eastman Chemical 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 Eastman Chemical, you can compare the effects of market volatilities on Silicon Motion and Eastman Chemical 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 Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Motion and Eastman Chemical.
Diversification Opportunities for Silicon Motion and Eastman Chemical
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Silicon and Eastman is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical 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 Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Silicon Motion i.e., Silicon Motion and Eastman Chemical go up and down completely randomly.
Pair Corralation between Silicon Motion and Eastman Chemical
Assuming the 90 days trading horizon Silicon Motion Technology is expected to generate 1.76 times more return on investment than Eastman Chemical. However, Silicon Motion is 1.76 times more volatile than Eastman Chemical. It trades about 0.02 of its potential returns per unit of risk. Eastman Chemical is currently generating about -0.01 per unit of risk. If you would invest 4,950 in Silicon Motion Technology on August 25, 2024 and sell it today you would earn a total of 50.00 from holding Silicon Motion Technology or generate 1.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Silicon Motion Technology vs. Eastman Chemical
Performance |
| Timeline |
| Silicon Motion Technology |
| Eastman Chemical |
Silicon Motion and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicon Motion and Eastman Chemical
The main advantage of trading using opposite Silicon Motion and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Motion position performs unexpectedly, Eastman Chemical 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 Eastman Chemical will offset losses from the drop in Eastman Chemical's long position.| Silicon Motion vs. Apple Inc | Silicon Motion vs. Apple Inc | Silicon Motion vs. Apple Inc | Silicon Motion vs. Apple Inc |
| Eastman Chemical vs. Sociedad Qumica y | Eastman Chemical vs. Superior Plus Corp | Eastman Chemical vs. NMI Holdings | Eastman Chemical vs. Origin Agritech |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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