Correlation Between Silicon Motion and Nova
Can any of the company-specific risk be diversified away by investing in both Silicon Motion and Nova 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 Nova 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 Nova, you can compare the effects of market volatilities on Silicon Motion and Nova 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 Nova. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Motion and Nova.
Diversification Opportunities for Silicon Motion and Nova
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Silicon and Nova is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Nova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova 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 Nova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova has no effect on the direction of Silicon Motion i.e., Silicon Motion and Nova go up and down completely randomly.
Pair Corralation between Silicon Motion and Nova
Given the investment horizon of 90 days Silicon Motion Technology is expected to generate 0.81 times more return on investment than Nova. However, Silicon Motion Technology is 1.24 times less risky than Nova. It trades about -0.08 of its potential returns per unit of risk. Nova is currently generating about -0.16 per unit of risk. If you would invest 5,548 in Silicon Motion Technology on August 31, 2024 and sell it today you would lose (305.00) from holding Silicon Motion Technology or give up 5.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Silicon Motion Technology vs. Nova
Performance |
| Timeline |
| Silicon Motion Technology |
| Nova |
Silicon Motion and Nova Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicon Motion and Nova
The main advantage of trading using opposite Silicon Motion and Nova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Motion position performs unexpectedly, Nova 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 Nova will offset losses from the drop in Nova's long position.| 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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