Correlation Between Silicon Motion and Universal Insurance

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

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

Diversification Opportunities for Silicon Motion and Universal Insurance

-0.22

Correlation Coefficient

Silicon Motion  Universal Insurance

Very good diversification

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

Pair Corralation between Silicon Motion and Universal Insurance

Assuming the 90 days trading horizon Silicon Motion is expected to generate 27.36 times less return on investment than Universal Insurance. But when comparing it to its historical volatility, Silicon Motion Technology is 1.24 times less risky than Universal Insurance. It trades about 0.0 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  993.00  in Universal Insurance Holdings on October 4, 2024 and sell it today you would earn a total of  967.00  from holding Universal Insurance Holdings or generate 97.38% return on investment over 90 days.

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

Silicon Motion Technology  vs.  Universal Insurance Holdings

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 comparatively stable basic indicators, Silicon Motion is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Universal Insurance

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Universal Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Silicon Motion and Universal Insurance

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

The idea behind Silicon Motion Technology and Universal Insurance Holdings 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.