Correlation Between Silicon Motion and Mitsui Chemicals

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

Diversification Opportunities for Silicon Motion and Mitsui Chemicals

-0.1

Correlation Coefficient

Silicon Motion  Mitsui Chemicals

Good diversification

The 3 months correlation between Silicon and Mitsui is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals 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 Mitsui Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Chemicals has no effect on the direction of Silicon Motion i.e., Silicon Motion and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Silicon Motion and Mitsui Chemicals

Assuming the 90 days trading horizon Silicon Motion Technology is expected to under-perform the Mitsui Chemicals. In addition to that, Silicon Motion is 1.96 times more volatile than Mitsui Chemicals. It trades about -0.01 of its total potential returns per unit of risk. Mitsui Chemicals is currently generating about 0.08 per unit of volatility. If you would invest  2,080  in Mitsui Chemicals on December 28, 2024 and sell it today you would earn a total of  120.00  from holding Mitsui Chemicals or generate 5.77% return on investment over 90 days.

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

Silicon Motion Technology  vs.  Mitsui Chemicals

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.

Mitsui Chemicals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui Chemicals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Mitsui Chemicals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Silicon Motion and Mitsui Chemicals

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

The idea behind Silicon Motion Technology and Mitsui Chemicals 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 Stocks Directory module to find actively traded stocks across global markets.