Correlation Between GSI Technology and Silicon Motion

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

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

Diversification Opportunities for GSI Technology and Silicon Motion

0.13

Correlation Coefficient

GSI Technology  Silicon Motion

Average diversification

The 3 months correlation between GSI and Silicon is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding GSI Technology 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 GSI Technology 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 GSI Technology 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 GSI Technology i.e., GSI Technology and Silicon Motion go up and down completely randomly.

Pair Corralation between GSI Technology and Silicon Motion

Given the investment horizon of 90 days GSI Technology is expected to generate 2.17 times more return on investment than Silicon Motion. However, GSI Technology is 2.17 times more volatile than Silicon Motion Technology. It trades about 0.08 of its potential returns per unit of risk. Silicon Motion Technology is currently generating about -0.06 per unit of risk. If you would invest  263.00  in GSI Technology on August 31, 2024 and sell it today you would earn a total of  55.00  from holding GSI Technology or generate 20.91% return on investment over 90 days.

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

GSI Technology  vs.  Silicon Motion Technology

GSI Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GSI Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, GSI Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Silicon Motion Technology

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with GSI Technology and Silicon Motion

The main advantage of trading using opposite GSI Technology and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSI Technology 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 GSI Technology 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.