Correlation Between Silicon Motion and Nucor

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

Diversification Opportunities for Silicon Motion and Nucor

-0.37

Correlation Coefficient

Silicon Motion  Nucor

Very good diversification

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

Pair Corralation between Silicon Motion and Nucor

Assuming the 90 days trading horizon Silicon Motion Technology is expected to generate 1.04 times more return on investment than Nucor. However, Silicon Motion is 1.04 times more volatile than Nucor. It trades about 0.0 of its potential returns per unit of risk. Nucor is currently generating about -0.01 per unit of risk. If you would invest  5,743  in Silicon Motion Technology on October 4, 2024 and sell it today you would lose (543.00) from holding Silicon Motion Technology or give up 9.45% of portfolio value over 90 days.

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

Silicon Motion Technology  vs.  Nucor

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.

Nucor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nucor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Silicon Motion and Nucor

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

The idea behind Silicon Motion Technology and Nucor 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.