Correlation Between Silicon Motion and Intel

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

Diversification Opportunities for Silicon Motion and Intel

-0.45

Correlation Coefficient

Silicon Motion  Intel

Very good diversification

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

Pair Corralation between Silicon Motion and Intel

Assuming the 90 days trading horizon Silicon Motion Technology is expected to generate 0.73 times more return on investment than Intel. However, Silicon Motion Technology is 1.37 times less risky than Intel. It trades about -0.01 of its potential returns per unit of risk. Intel is currently generating about -0.06 per unit of risk. If you would invest  5,507  in Silicon Motion Technology on October 24, 2024 and sell it today you would lose (507.00) from holding Silicon Motion Technology or give up 9.21% 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.  Intel

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Intel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Intel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Silicon Motion and Intel

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

The idea behind Silicon Motion Technology and Intel 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.