Correlation Between Infineon Technologies and Silicon Laboratories

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

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

Diversification Opportunities for Infineon Technologies and Silicon Laboratories

0.5

Correlation Coefficient

Infineon Technologies  Silicon Laboratories

Very weak diversification

The 3 months correlation between Infineon and Silicon is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Infineon Technologies AG and Silicon Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Laboratories and Infineon Technologies 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 Infineon Technologies AG are associated (or correlated) with Silicon Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Laboratories has no effect on the direction of Infineon Technologies i.e., Infineon Technologies and Silicon Laboratories go up and down completely randomly.

Pair Corralation between Infineon Technologies and Silicon Laboratories

Assuming the 90 days horizon Infineon Technologies is expected to generate 2.17 times less return on investment than Silicon Laboratories. But when comparing it to its historical volatility, Infineon Technologies AG is 1.21 times less risky than Silicon Laboratories. It trades about 0.07 of its potential returns per unit of risk. Silicon Laboratories is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  11,511  in Silicon Laboratories on October 26, 2024 and sell it today you would earn a total of  2,640  from holding Silicon Laboratories or generate 22.93% return on investment over 90 days.

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

Infineon Technologies AG  vs.  Silicon Laboratories

Infineon Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Infineon Technologies AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Infineon Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Silicon Laboratories

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Laboratories are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Silicon Laboratories sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Infineon Technologies and Silicon Laboratories

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

The idea behind Infineon Technologies AG and Silicon Laboratories 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.