Correlation Between Reinsurance Group and SILICON LABORATOR

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

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

Diversification Opportunities for Reinsurance Group and SILICON LABORATOR

-0.35

Correlation Coefficient

Reinsurance Group  SILICON LABORATOR

Very good diversification

The 3 months correlation between Reinsurance and SILICON is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and SILICON LABORATOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SILICON LABORATOR and Reinsurance Group 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 Reinsurance Group of are associated (or correlated) with SILICON LABORATOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SILICON LABORATOR has no effect on the direction of Reinsurance Group i.e., Reinsurance Group and SILICON LABORATOR go up and down completely randomly.

Pair Corralation between Reinsurance Group and SILICON LABORATOR

Assuming the 90 days trading horizon Reinsurance Group is expected to generate 1.15 times less return on investment than SILICON LABORATOR. But when comparing it to its historical volatility, Reinsurance Group of is 1.12 times less risky than SILICON LABORATOR. It trades about 0.17 of its potential returns per unit of risk. SILICON LABORATOR is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  11,600  in SILICON LABORATOR on October 11, 2024 and sell it today you would earn a total of  700.00  from holding SILICON LABORATOR or generate 6.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Reinsurance Group of  vs.  SILICON LABORATOR

Reinsurance Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reinsurance Group of are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Reinsurance Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SILICON LABORATOR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SILICON LABORATOR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, SILICON LABORATOR unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reinsurance Group and SILICON LABORATOR

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

The idea behind Reinsurance Group of and SILICON LABORATOR 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.