Correlation Between Silicon Motion and General Electric

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

Diversification Opportunities for Silicon Motion and General Electric

0.0

Correlation Coefficient

Silicon Motion  General Electric

Pay attention - limited upside

The 3 months correlation between Silicon and General is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric 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 General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of Silicon Motion i.e., Silicon Motion and General Electric go up and down completely randomly.

Pair Corralation between Silicon Motion and General Electric

Assuming the 90 days trading horizon Silicon Motion is expected to generate 5.64 times less return on investment than General Electric. In addition to that, Silicon Motion is 1.3 times more volatile than General Electric. It trades about 0.02 of its total potential returns per unit of risk. General Electric is currently generating about 0.14 per unit of volatility. If you would invest  16,044  in General Electric on December 23, 2024 and sell it today you would earn a total of  2,706  from holding General Electric or generate 16.87% return on investment over 90 days.

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

Silicon Motion Technology  vs.  General Electric

Silicon Motion Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Motion Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

General Electric

Risk-Adjusted Performance

OK

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

Pair Trading with Silicon Motion and General Electric

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

The idea behind Silicon Motion Technology and General Electric 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.