Correlation Between Silicon Motion and OtelloASA

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

Diversification Opportunities for Silicon Motion and OtelloASA

-0.1

Correlation Coefficient

Silicon Motion  OtelloASA

Good diversification

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

Pair Corralation between Silicon Motion and OtelloASA

Assuming the 90 days trading horizon Silicon Motion Technology is expected to under-perform the OtelloASA. In addition to that, Silicon Motion is 1.49 times more volatile than Otello ASA. It trades about -0.05 of its total potential returns per unit of risk. Otello ASA is currently generating about 0.13 per unit of volatility. If you would invest  64.00  in Otello ASA on December 31, 2024 and sell it today you would earn a total of  9.00  from holding Otello ASA or generate 14.06% 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.  Otello ASA

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 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.

Otello ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Otello ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, OtelloASA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Silicon Motion and OtelloASA

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

The idea behind Silicon Motion Technology and Otello ASA 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.