Correlation Between Silicon Motion and Nestlé SA
Can any of the company-specific risk be diversified away by investing in both Silicon Motion and Nestlé SA 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 Nestlé SA 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 Nestl SA, you can compare the effects of market volatilities on Silicon Motion and Nestlé SA 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 Nestlé SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Motion and Nestlé SA.
Diversification Opportunities for Silicon Motion and Nestlé SA
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Silicon and Nestlé is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestlé SA 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 Nestlé SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestlé SA has no effect on the direction of Silicon Motion i.e., Silicon Motion and Nestlé SA go up and down completely randomly.
Pair Corralation between Silicon Motion and Nestlé SA
Assuming the 90 days trading horizon Silicon Motion Technology is expected to generate 2.88 times more return on investment than Nestlé SA. However, Silicon Motion is 2.88 times more volatile than Nestl SA. It trades about 0.31 of its potential returns per unit of risk. Nestl SA is currently generating about -0.22 per unit of risk. If you would invest 4,760 in Silicon Motion Technology on September 19, 2024 and sell it today you would earn a total of 840.00 from holding Silicon Motion Technology or generate 17.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Silicon Motion Technology vs. Nestl SA
Performance |
| Timeline |
| Silicon Motion Technology |
| Nestlé SA |
Silicon Motion and Nestlé SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicon Motion and Nestlé SA
The main advantage of trading using opposite Silicon Motion and Nestlé SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Motion position performs unexpectedly, Nestlé SA 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 Nestlé SA will offset losses from the drop in Nestlé SA's long position.| Silicon Motion vs. RCM TECHNOLOGIES | Silicon Motion vs. MeVis Medical Solutions | Silicon Motion vs. CVR Medical Corp | Silicon Motion vs. Clearside Biomedical |
| Nestlé SA vs. Superior Plus Corp | Nestlé SA vs. SIVERS SEMICONDUCTORS AB | Nestlé SA vs. NorAm Drilling AS | Nestlé SA vs. Norsk Hydro ASA |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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