Correlation Between Silicon Motion and MUTUIONLINE

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

Diversification Opportunities for Silicon Motion and MUTUIONLINE

0.37

Correlation Coefficient

Silicon Motion  MUTUIONLINE

Weak diversification

The 3 months correlation between Silicon and MUTUIONLINE is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and MUTUIONLINE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MUTUIONLINE 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 MUTUIONLINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MUTUIONLINE has no effect on the direction of Silicon Motion i.e., Silicon Motion and MUTUIONLINE go up and down completely randomly.

Pair Corralation between Silicon Motion and MUTUIONLINE

Assuming the 90 days trading horizon Silicon Motion Technology is expected to under-perform the MUTUIONLINE. In addition to that, Silicon Motion is 1.07 times more volatile than MUTUIONLINE. It trades about -0.02 of its total potential returns per unit of risk. MUTUIONLINE is currently generating about 0.11 per unit of volatility. If you would invest  3,685  in MUTUIONLINE on December 25, 2024 and sell it today you would earn a total of  580.00  from holding MUTUIONLINE or generate 15.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Silicon Motion Technology  vs.  MUTUIONLINE

Silicon Motion Technology

Risk-Adjusted Performance

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.

MUTUIONLINE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MUTUIONLINE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, MUTUIONLINE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Silicon Motion and MUTUIONLINE

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

The idea behind Silicon Motion Technology and MUTUIONLINE 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.