Correlation Between Silicon Motion and News

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Can any of the company-specific risk be diversified away by investing in both Silicon Motion and News 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 News 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 News Corporation, you can compare the effects of market volatilities on Silicon Motion and News 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 News. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Motion and News.

Diversification Opportunities for Silicon Motion and News

-0.3
  Correlation Coefficient

Very good diversification

The 3 months correlation between Silicon and News is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and News Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on News 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 News. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of News has no effect on the direction of Silicon Motion i.e., Silicon Motion and News go up and down completely randomly.

Pair Corralation between Silicon Motion and News

Assuming the 90 days trading horizon Silicon Motion Technology is expected to generate 2.27 times more return on investment than News. However, Silicon Motion is 2.27 times more volatile than News Corporation. It trades about 0.17 of its potential returns per unit of risk. News Corporation is currently generating about 0.06 per unit of risk. If you would invest  4,871  in Silicon Motion Technology on September 12, 2024 and sell it today you would earn a total of  479.00  from holding Silicon Motion Technology or generate 9.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Silicon Motion Technology  vs.  News Corp.

 Performance 
       Timeline  
Silicon Motion Technology 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Motion Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Silicon Motion may actually be approaching a critical reversion point that can send shares even higher in January 2025.
News 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in News Corporation are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, News reported solid returns over the last few months and may actually be approaching a breakup point.

Silicon Motion and News Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Silicon Motion and News

The main advantage of trading using opposite Silicon Motion and News positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Motion position performs unexpectedly, News 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 News will offset losses from the drop in News' long position.
The idea behind Silicon Motion Technology and News Corporation 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.
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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