Correlation Between Silicon Motion and PACCAR
Can any of the company-specific risk be diversified away by investing in both Silicon Motion and PACCAR 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 PACCAR 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 PACCAR Inc, you can compare the effects of market volatilities on Silicon Motion and PACCAR 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 PACCAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Motion and PACCAR.
Diversification Opportunities for Silicon Motion and PACCAR
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Silicon and PACCAR is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Silicon Motion i.e., Silicon Motion and PACCAR go up and down completely randomly.
Pair Corralation between Silicon Motion and PACCAR
Assuming the 90 days trading horizon Silicon Motion Technology is expected to generate 2.2 times more return on investment than PACCAR. However, Silicon Motion is 2.2 times more volatile than PACCAR Inc. It trades about 0.01 of its potential returns per unit of risk. PACCAR Inc is currently generating about -0.22 per unit of risk. If you would invest 5,100 in Silicon Motion Technology on September 27, 2024 and sell it today you would earn a total of 0.00 from holding Silicon Motion Technology or generate 0.0% 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. PACCAR Inc
Performance |
| Timeline |
| Silicon Motion Technology |
| PACCAR Inc |
Silicon Motion and PACCAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicon Motion and PACCAR
The main advantage of trading using opposite Silicon Motion and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Motion position performs unexpectedly, PACCAR 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 PACCAR will offset losses from the drop in PACCAR's long position.| Silicon Motion vs. Apple Inc | Silicon Motion vs. Apple Inc | Silicon Motion vs. Apple Inc | Silicon Motion vs. Apple Inc |
| PACCAR vs. Quaker Chemical | PACCAR vs. Fast Retailing Co | PACCAR vs. Silicon Motion Technology | PACCAR vs. Vastned Retail NV |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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