Correlation Between Hannstar Display and Silicon Power

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

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

Diversification Opportunities for Hannstar Display and Silicon Power

0.66

Correlation Coefficient

Hannstar Display  Silicon Power

Poor diversification

The 3 months correlation between Hannstar and Silicon is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hannstar Display 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 Hannstar Display 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 Hannstar Display 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 Hannstar Display i.e., Hannstar Display and Silicon Power go up and down completely randomly.

Pair Corralation between Hannstar Display and Silicon Power

Assuming the 90 days trading horizon Hannstar Display Corp is expected to under-perform the Silicon Power. But the stock apears to be less risky and, when comparing its historical volatility, Hannstar Display Corp is 1.44 times less risky than Silicon Power. The stock trades about -0.05 of its potential returns per unit of risk. The 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	Significant
Accuracy	100.0%
Values	Daily Returns

Hannstar Display Corp  vs.  Silicon Power Computer

Hannstar Display Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hannstar Display Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture 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 newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Hannstar Display and Silicon Power

The main advantage of trading using opposite Hannstar Display and Silicon Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hannstar Display 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 Hannstar Display 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.