Correlation Between VULCAN MATERIALS and Silicon Motion
Can any of the company-specific risk be diversified away by investing in both VULCAN MATERIALS 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 VULCAN MATERIALS and Silicon Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VULCAN MATERIALS and Silicon Motion Technology, you can compare the effects of market volatilities on VULCAN MATERIALS 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 VULCAN MATERIALS with a short position of Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of VULCAN MATERIALS and Silicon Motion.
Diversification Opportunities for VULCAN MATERIALS and Silicon Motion
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between VULCAN and Silicon is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS 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 VULCAN MATERIALS 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 VULCAN MATERIALS 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 VULCAN MATERIALS i.e., VULCAN MATERIALS and Silicon Motion go up and down completely randomly.
Pair Corralation between VULCAN MATERIALS and Silicon Motion
Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 0.67 times more return on investment than Silicon Motion. However, VULCAN MATERIALS is 1.5 times less risky than Silicon Motion. It trades about 0.05 of its potential returns per unit of risk. Silicon Motion Technology is currently generating about 0.02 per unit of risk. If you would invest 24,954 in VULCAN MATERIALS on November 1, 2024 and sell it today you would earn a total of 1,046 from holding VULCAN MATERIALS or generate 4.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.33% |
| Values | Daily Returns |
VULCAN MATERIALS vs. Silicon Motion Technology
Performance |
| Timeline |
| VULCAN MATERIALS |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Silicon Motion Technology |
VULCAN MATERIALS and Silicon Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VULCAN MATERIALS and Silicon Motion
The main advantage of trading using opposite VULCAN MATERIALS and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VULCAN MATERIALS 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.| VULCAN MATERIALS vs. FANDIFI TECHNOLOGY P | VULCAN MATERIALS vs. Easy Software AG | VULCAN MATERIALS vs. PKSHA TECHNOLOGY INC | VULCAN MATERIALS vs. PSI Software AG |
| Silicon Motion vs. United States Steel | Silicon Motion vs. Warner Music Group | Silicon Motion vs. MOUNT GIBSON IRON | Silicon Motion vs. Insteel Industries |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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