Correlation Between SILICON LABORATOR and FedEx Corp

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

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

Diversification Opportunities for SILICON LABORATOR and FedEx Corp

0.22

Correlation Coefficient

SILICON LABORATOR  FedEx Corp

Modest diversification

The 3 months correlation between SILICON and FedEx is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding SILICON LABORATOR and FedEx Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx Corp 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 FedEx Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx Corp has no effect on the direction of SILICON LABORATOR i.e., SILICON LABORATOR and FedEx Corp go up and down completely randomly.

Pair Corralation between SILICON LABORATOR and FedEx Corp

Assuming the 90 days trading horizon SILICON LABORATOR is expected to generate 1.46 times more return on investment than FedEx Corp. However, SILICON LABORATOR is 1.46 times more volatile than FedEx Corp. It trades about -0.02 of its potential returns per unit of risk. FedEx Corp is currently generating about -0.08 per unit of risk. If you would invest  11,900  in SILICON LABORATOR on December 21, 2024 and sell it today you would lose (600.00) from holding SILICON LABORATOR or give up 5.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

SILICON LABORATOR  vs.  FedEx Corp

SILICON LABORATOR

Risk-Adjusted Performance

Very Weak

Over the last 90 days SILICON LABORATOR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SILICON LABORATOR is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

FedEx Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FedEx Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic 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 SILICON LABORATOR and FedEx Corp

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

The idea behind SILICON LABORATOR and FedEx Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.