Correlation Between Silicom and Optical Cable
Can any of the company-specific risk be diversified away by investing in both Silicom and Optical Cable 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 Optical Cable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silicom and Optical Cable, you can compare the effects of market volatilities on Silicom and Optical Cable 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 Optical Cable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicom and Optical Cable.
Diversification Opportunities for Silicom and Optical Cable
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Silicom and Optical is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Silicom and Optical Cable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optical Cable 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 Optical Cable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optical Cable has no effect on the direction of Silicom i.e., Silicom and Optical Cable go up and down completely randomly.
Pair Corralation between Silicom and Optical Cable
Given the investment horizon of 90 days Silicom is expected to under-perform the Optical Cable. But the stock apears to be less risky and, when comparing its historical volatility, Silicom is 26.61 times less risky than Optical Cable. The stock trades about -0.03 of its potential returns per unit of risk. The Optical Cable is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 275.00 in Optical Cable on September 3, 2024 and sell it today you would lose (60.00) from holding Optical Cable or give up 21.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Silicom vs. Optical Cable
Performance |
| Timeline |
| Silicom |
| Optical Cable |
Silicom and Optical Cable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicom and Optical Cable
The main advantage of trading using opposite Silicom and Optical Cable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicom position performs unexpectedly, Optical Cable 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 Optical Cable will offset losses from the drop in Optical Cable's long position.| Silicom vs. Ituran Location and | Silicom vs. Sapiens International | Silicom vs. Allot Communications | Silicom vs. Radcom |
| Optical Cable vs. KVH Industries | Optical Cable vs. Knowles Cor | Optical Cable vs. Comtech Telecommunications Corp | Optical Cable vs. Lantronix |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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