Correlation Between SILICON LABORATOR and ABB

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

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

Diversification Opportunities for SILICON LABORATOR and ABB

0.3

Correlation Coefficient

SILICON LABORATOR  ABB

Weak diversification

The 3 months correlation between SILICON and ABB is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SILICON LABORATOR and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and SILICON LABORATOR 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 SILICON LABORATOR are associated (or correlated) with ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of SILICON LABORATOR i.e., SILICON LABORATOR and ABB go up and down completely randomly.

Pair Corralation between SILICON LABORATOR and ABB

Assuming the 90 days trading horizon SILICON LABORATOR is expected to generate 1.26 times more return on investment than ABB. However, SILICON LABORATOR is 1.26 times more volatile than ABB. It trades about 0.24 of its potential returns per unit of risk. ABB is currently generating about 0.16 per unit of risk. If you would invest  12,200  in SILICON LABORATOR on October 26, 2024 and sell it today you would earn a total of  1,300  from holding SILICON LABORATOR or generate 10.66% return on investment over 90 days.

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

SILICON LABORATOR  vs.  ABB

SILICON LABORATOR

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SILICON LABORATOR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SILICON LABORATOR unveiled solid returns over the last few months and may actually be approaching a breakup point.

ABB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ABB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking indicators, ABB may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SILICON LABORATOR and ABB

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

The idea behind SILICON LABORATOR and ABB 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.