Correlation Between Silicom and Credo Technology
Can any of the company-specific risk be diversified away by investing in both Silicom and Credo Technology 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 Silicom and Credo Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silicom and Credo Technology Group, you can compare the effects of market volatilities on Silicom and Credo Technology 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 Silicom with a short position of Credo Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicom and Credo Technology.
Diversification Opportunities for Silicom and Credo Technology
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Silicom and Credo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Silicom and Credo Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credo Technology and Silicom 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 Silicom are associated (or correlated) with Credo Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credo Technology has no effect on the direction of Silicom i.e., Silicom and Credo Technology go up and down completely randomly.
Pair Corralation between Silicom and Credo Technology
Given the investment horizon of 90 days Silicom is expected to under-perform the Credo Technology. But the stock apears to be less risky and, when comparing its historical volatility, Silicom is 1.76 times less risky than Credo Technology. The stock trades about -0.04 of its potential returns per unit of risk. The Credo Technology Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,863 in Credo Technology Group on November 1, 2024 and sell it today you would earn a total of 4,016 from holding Credo Technology Group or generate 215.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Silicom vs. Credo Technology Group
Performance |
| Timeline |
| Silicom |
| Credo Technology |
Silicom and Credo Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicom and Credo Technology
The main advantage of trading using opposite Silicom and Credo Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicom position performs unexpectedly, Credo Technology 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 Credo Technology will offset losses from the drop in Credo Technology's long position.| Silicom vs. Ituran Location and | Silicom vs. Sapiens International | Silicom vs. Allot Communications | Silicom vs. Radcom |
| Credo Technology vs. Zebra Technologies | Credo Technology vs. Ubiquiti Networks | Credo Technology vs. Ciena Corp | Credo Technology vs. Clearfield |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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