Correlation Between Globex Mining and Silicon Motion

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

By analyzing existing cross correlation between Globex Mining Enterprises and Silicon Motion Technology, you can compare the effects of market volatilities on Globex Mining 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 Globex Mining with a short position of Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globex Mining and Silicon Motion.

Diversification Opportunities for Globex Mining and Silicon Motion

-0.12

Correlation Coefficient

Globex Mining  Silicon Motion

Good diversification

The 3 months correlation between Globex and Silicon is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Globex Mining Enterprises 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 Globex Mining 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 Globex Mining Enterprises 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 Globex Mining i.e., Globex Mining and Silicon Motion go up and down completely randomly.

Pair Corralation between Globex Mining and Silicon Motion

Assuming the 90 days trading horizon Globex Mining Enterprises is expected to generate 0.99 times more return on investment than Silicon Motion. However, Globex Mining Enterprises is 1.01 times less risky than Silicon Motion. It trades about 0.2 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  77.00  in Globex Mining Enterprises on December 24, 2024 and sell it today you would earn a total of  25.00  from holding Globex Mining Enterprises or generate 32.47% return on investment over 90 days.

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

Globex Mining Enterprises  vs.  Silicon Motion Technology

Globex Mining Enterprises

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Globex Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Silicon Motion Technology

Risk-Adjusted Performance

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 comparatively stable basic indicators, Silicon Motion is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Globex Mining and Silicon Motion

The main advantage of trading using opposite Globex Mining and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globex Mining 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 Globex Mining Enterprises 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.