Correlation Between Smart Global and Silicon Motion
Can any of the company-specific risk be diversified away by investing in both Smart Global and Silicon Motion 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 Smart Global and Silicon Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smart Global Holdings and Silicon Motion Technology, you can compare the effects of market volatilities on Smart Global and Silicon Motion 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 Smart Global with a short position of Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart Global and Silicon Motion.
Diversification Opportunities for Smart Global and Silicon Motion
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smart and Silicon is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Smart Global Holdings and Silicon Motion Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Motion Technology and Smart Global 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 Smart Global Holdings are associated (or correlated) with Silicon Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Motion Technology has no effect on the direction of Smart Global i.e., Smart Global and Silicon Motion go up and down completely randomly.
Pair Corralation between Smart Global and Silicon Motion
Considering the 90-day investment horizon Smart Global Holdings is expected to generate 1.06 times more return on investment than Silicon Motion. However, Smart Global is 1.06 times more volatile than Silicon Motion Technology. It trades about -0.01 of its potential returns per unit of risk. Silicon Motion Technology is currently generating about -0.08 per unit of risk. If you would invest 2,094 in Smart Global Holdings on August 23, 2024 and sell it today you would lose (53.00) from holding Smart Global Holdings or give up 2.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 59.38% |
| Values | Daily Returns |
Smart Global Holdings vs. Silicon Motion Technology
Performance |
| Timeline |
| Smart Global Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Silicon Motion Technology |
Smart Global and Silicon Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smart Global and Silicon Motion
The main advantage of trading using opposite Smart Global and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart Global position performs unexpectedly, Silicon Motion 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 Silicon Motion will offset losses from the drop in Silicon Motion's long position.| Smart Global vs. Silicon Motion Technology | Smart Global vs. MACOM Technology Solutions | Smart Global vs. Semtech | Smart Global vs. Alpha and Omega |
| Silicon Motion vs. ASE Industrial Holding | Silicon Motion vs. United Microelectronics | Silicon Motion vs. ChipMOS Technologies | Silicon Motion vs. SemiLEDS |
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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