Correlation Between BrainChip Holdings and Silicon Motion

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Can any of the company-specific risk be diversified away by investing in both BrainChip Holdings 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 BrainChip Holdings and Silicon Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BrainChip Holdings and Silicon Motion Technology, you can compare the effects of market volatilities on BrainChip Holdings 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 BrainChip Holdings with a short position of Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of BrainChip Holdings and Silicon Motion.

Diversification Opportunities for BrainChip Holdings and Silicon Motion

-0.02
  Correlation Coefficient

Good diversification

The 3 months correlation between BrainChip and Silicon is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding BrainChip Holdings 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 BrainChip Holdings 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 BrainChip Holdings 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 BrainChip Holdings i.e., BrainChip Holdings and Silicon Motion go up and down completely randomly.

Pair Corralation between BrainChip Holdings and Silicon Motion

Assuming the 90 days horizon BrainChip Holdings is expected to under-perform the Silicon Motion. In addition to that, BrainChip Holdings is 1.79 times more volatile than Silicon Motion Technology. It trades about -0.03 of its total potential returns per unit of risk. Silicon Motion Technology is currently generating about -0.01 per unit of volatility. If you would invest  5,480  in Silicon Motion Technology on September 22, 2024 and sell it today you would lose (90.00) from holding Silicon Motion Technology or give up 1.64% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

BrainChip Holdings  vs.  Silicon Motion Technology

 Performance 
       Timeline  
BrainChip Holdings 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in BrainChip Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, BrainChip Holdings showed solid returns over the last few months and may actually be approaching a breakup point.
Silicon Motion Technology 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Silicon Motion Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Silicon Motion is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

BrainChip Holdings and Silicon Motion Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BrainChip Holdings and Silicon Motion

The main advantage of trading using opposite BrainChip Holdings and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BrainChip Holdings 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.
The idea behind BrainChip Holdings and Silicon Motion Technology 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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