Correlation Between Silicon Motion and AIR PRODCHEMICALS

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Can any of the company-specific risk be diversified away by investing in both Silicon Motion and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 AIR PRODCHEMICALS, you can compare the effects of market volatilities on Silicon Motion and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Motion and AIR PRODCHEMICALS.

Diversification Opportunities for Silicon Motion and AIR PRODCHEMICALS

-0.14
  Correlation Coefficient

Good diversification

The 3 months correlation between Silicon and AIR is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of Silicon Motion i.e., Silicon Motion and AIR PRODCHEMICALS go up and down completely randomly.

Pair Corralation between Silicon Motion and AIR PRODCHEMICALS

Assuming the 90 days trading horizon Silicon Motion Technology is expected to generate 2.32 times more return on investment than AIR PRODCHEMICALS. However, Silicon Motion is 2.32 times more volatile than AIR PRODCHEMICALS. It trades about 0.01 of its potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about 0.0 per unit of risk. If you would invest  5,049  in Silicon Motion Technology on October 20, 2024 and sell it today you would lose (69.00) from holding Silicon Motion Technology or give up 1.37% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Silicon Motion Technology  vs.  AIR PRODCHEMICALS

 Performance 
       Timeline  
Silicon Motion Technology 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest stock price uproar, may contribute to short-horizon losses for the private investors.
AIR PRODCHEMICALS 

Risk-Adjusted Performance

0 of 100

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

Silicon Motion and AIR PRODCHEMICALS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Silicon Motion and AIR PRODCHEMICALS

The main advantage of trading using opposite Silicon Motion and AIR PRODCHEMICALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Motion position performs unexpectedly, AIR PRODCHEMICALS 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 AIR PRODCHEMICALS will offset losses from the drop in AIR PRODCHEMICALS's long position.
The idea behind Silicon Motion Technology and AIR PRODCHEMICALS 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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