Correlation Between Silicon Motion and Compagnie Financière

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

Diversification Opportunities for Silicon Motion and Compagnie Financière

0.17

Correlation Coefficient

Silicon Motion  Compagnie Financière

Average diversification

The 3 months correlation between Silicon and Compagnie is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Compagnie Financire Richemont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Financière 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 Compagnie Financière. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Financière has no effect on the direction of Silicon Motion i.e., Silicon Motion and Compagnie Financière go up and down completely randomly.

Pair Corralation between Silicon Motion and Compagnie Financière

Assuming the 90 days trading horizon Silicon Motion is expected to generate 93.1 times less return on investment than Compagnie Financière. But when comparing it to its historical volatility, Silicon Motion Technology is 1.24 times less risky than Compagnie Financière. It trades about 0.0 of its potential returns per unit of risk. Compagnie Financire Richemont is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,330  in Compagnie Financire Richemont on October 24, 2024 and sell it today you would earn a total of  380.00  from holding Compagnie Financire Richemont or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Silicon Motion Technology  vs.  Compagnie Financire Richemont

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.

Compagnie Financière

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Silicon Motion and Compagnie Financière

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

The idea behind Silicon Motion Technology and Compagnie Financire Richemont 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..