Correlation Between Silicon Motion and General Dynamics

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

Diversification Opportunities for Silicon Motion and General Dynamics

-0.45

Correlation Coefficient

Silicon Motion  General Dynamics

Very good diversification

The 3 months correlation between Silicon and General is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics 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 Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Dynamics has no effect on the direction of Silicon Motion i.e., Silicon Motion and General Dynamics go up and down completely randomly.

Pair Corralation between Silicon Motion and General Dynamics

Assuming the 90 days trading horizon Silicon Motion Technology is expected to generate 2.65 times more return on investment than General Dynamics. However, Silicon Motion is 2.65 times more volatile than General Dynamics. It trades about -0.02 of its potential returns per unit of risk. General Dynamics is currently generating about -0.07 per unit of risk. If you would invest  5,350  in Silicon Motion Technology on October 11, 2024 and sell it today you would lose (100.00) from holding Silicon Motion Technology or give up 1.87% of portfolio value over 90 days.

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

Silicon Motion Technology  vs.  General Dynamics

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.

General Dynamics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Dynamics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Silicon Motion and General Dynamics

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

The idea behind Silicon Motion Technology and General Dynamics 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.