Correlation Between Silicon Motion and PATRIOT BATTERY

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

Diversification Opportunities for Silicon Motion and PATRIOT BATTERY

0.36

Correlation Coefficient

Silicon Motion  PATRIOT BATTERY

Weak diversification

The 3 months correlation between Silicon and PATRIOT is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and PATRIOT BATTERY METINC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PATRIOT BATTERY METINC 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 PATRIOT BATTERY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PATRIOT BATTERY METINC has no effect on the direction of Silicon Motion i.e., Silicon Motion and PATRIOT BATTERY go up and down completely randomly.

Pair Corralation between Silicon Motion and PATRIOT BATTERY

Assuming the 90 days trading horizon Silicon Motion is expected to generate 1510.58 times less return on investment than PATRIOT BATTERY. But when comparing it to its historical volatility, Silicon Motion Technology is 2.04 times less risky than PATRIOT BATTERY. It trades about 0.0 of its potential returns per unit of risk. PATRIOT BATTERY METINC is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  194.00  in PATRIOT BATTERY METINC on October 9, 2024 and sell it today you would earn a total of  56.00  from holding PATRIOT BATTERY METINC or generate 28.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Silicon Motion Technology  vs.  PATRIOT BATTERY METINC

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.

PATRIOT BATTERY METINC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PATRIOT BATTERY METINC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, PATRIOT BATTERY is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Silicon Motion and PATRIOT BATTERY

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

The idea behind Silicon Motion Technology and PATRIOT BATTERY METINC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.