Correlation Between Lelon Electronics and Silicon Power

Can any of the company-specific risk be diversified away by investing in both Lelon Electronics and Silicon Power 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 Lelon Electronics and Silicon Power into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lelon Electronics Corp and Silicon Power Computer, you can compare the effects of market volatilities on Lelon Electronics and Silicon Power 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 Lelon Electronics with a short position of Silicon Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lelon Electronics and Silicon Power.

Diversification Opportunities for Lelon Electronics and Silicon Power

0.56

Correlation Coefficient

Lelon Electronics  Silicon Power

Very weak diversification

The 3 months correlation between Lelon and Silicon is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Lelon Electronics Corp and Silicon Power Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Power Computer and Lelon Electronics 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 Lelon Electronics Corp are associated (or correlated) with Silicon Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Power Computer has no effect on the direction of Lelon Electronics i.e., Lelon Electronics and Silicon Power go up and down completely randomly.

Pair Corralation between Lelon Electronics and Silicon Power

Assuming the 90 days trading horizon Lelon Electronics is expected to generate 1.36 times less return on investment than Silicon Power. But when comparing it to its historical volatility, Lelon Electronics Corp is 1.17 times less risky than Silicon Power. It trades about 0.04 of its potential returns per unit of risk. Silicon Power Computer is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,137  in Silicon Power Computer on December 4, 2024 and sell it today you would earn a total of  1,208  from holding Silicon Power Computer or generate 56.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Lelon Electronics Corp  vs.  Silicon Power Computer

Lelon Electronics Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lelon Electronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Lelon Electronics is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Silicon Power Computer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Silicon Power Computer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Silicon Power is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Lelon Electronics and Silicon Power

The main advantage of trading using opposite Lelon Electronics and Silicon Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lelon Electronics position performs unexpectedly, Silicon Power 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 Power will offset losses from the drop in Silicon Power's long position.

The idea behind Lelon Electronics Corp and Silicon Power Computer pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.