Correlation Between Silicon Motion and Silicon Laboratories
Can any of the company-specific risk be diversified away by investing in both Silicon Motion and Silicon Laboratories 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 Silicon Laboratories 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 Silicon Laboratories, you can compare the effects of market volatilities on Silicon Motion and Silicon Laboratories 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 Silicon Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Motion and Silicon Laboratories.
Diversification Opportunities for Silicon Motion and Silicon Laboratories
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Silicon and Silicon is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Silicon Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Laboratories 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 Silicon Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Laboratories has no effect on the direction of Silicon Motion i.e., Silicon Motion and Silicon Laboratories go up and down completely randomly.
Pair Corralation between Silicon Motion and Silicon Laboratories
Given the investment horizon of 90 days Silicon Motion Technology is expected to generate 0.77 times more return on investment than Silicon Laboratories. However, Silicon Motion Technology is 1.29 times less risky than Silicon Laboratories. It trades about -0.03 of its potential returns per unit of risk. Silicon Laboratories is currently generating about -0.08 per unit of risk. If you would invest 5,646 in Silicon Motion Technology on August 23, 2024 and sell it today you would lose (166.00) from holding Silicon Motion Technology or give up 2.94% 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. Silicon Laboratories
Performance |
| Timeline |
| Silicon Motion Technology |
| Silicon Laboratories |
Silicon Motion and Silicon Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicon Motion and Silicon Laboratories
The main advantage of trading using opposite Silicon Motion and Silicon Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Motion position performs unexpectedly, Silicon Laboratories 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 Laboratories will offset losses from the drop in Silicon Laboratories' long position.| Silicon Motion vs. ASE Industrial Holding | Silicon Motion vs. United Microelectronics | Silicon Motion vs. ChipMOS Technologies | Silicon Motion vs. SemiLEDS |
| Silicon Laboratories vs. Diodes Incorporated | Silicon Laboratories vs. MACOM Technology Solutions | Silicon Laboratories vs. FormFactor | Silicon Laboratories vs. Amkor Technology |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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