Correlation Between Silicon Motion and Sleep Number
Can any of the company-specific risk be diversified away by investing in both Silicon Motion and Sleep Number 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 Sleep Number 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 Sleep Number Corp, you can compare the effects of market volatilities on Silicon Motion and Sleep Number 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 Sleep Number. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Motion and Sleep Number.
Diversification Opportunities for Silicon Motion and Sleep Number
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Silicon and Sleep is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Sleep Number Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sleep Number Corp 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 Sleep Number. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sleep Number Corp has no effect on the direction of Silicon Motion i.e., Silicon Motion and Sleep Number go up and down completely randomly.
Pair Corralation between Silicon Motion and Sleep Number
Assuming the 90 days trading horizon Silicon Motion is expected to generate 5.93 times less return on investment than Sleep Number. But when comparing it to its historical volatility, Silicon Motion Technology is 2.41 times less risky than Sleep Number. It trades about 0.05 of its potential returns per unit of risk. Sleep Number Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,250 in Sleep Number Corp on September 2, 2024 and sell it today you would earn a total of 180.00 from holding Sleep Number Corp or generate 14.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Silicon Motion Technology vs. Sleep Number Corp
Performance |
| Timeline |
| Silicon Motion Technology |
| Sleep Number Corp |
Silicon Motion and Sleep Number Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicon Motion and Sleep Number
The main advantage of trading using opposite Silicon Motion and Sleep Number positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Motion position performs unexpectedly, Sleep Number 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 Sleep Number will offset losses from the drop in Sleep Number's long position.| Silicon Motion vs. CVS Health | Silicon Motion vs. Coor Service Management | Silicon Motion vs. Sabra Health Care | Silicon Motion vs. IMPERIAL TOBACCO |
| Sleep Number vs. Silicon Motion Technology | Sleep Number vs. Goodyear Tire Rubber | Sleep Number vs. WESTLAKE CHEMICAL | Sleep Number vs. CHEMICAL INDUSTRIES |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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