Correlation Between Silicon Motion and Thyssenkrupp

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

Diversification Opportunities for Silicon Motion and Thyssenkrupp

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between Silicon and Thyssenkrupp is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and thyssenkrupp AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on thyssenkrupp AG 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 Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of thyssenkrupp AG has no effect on the direction of Silicon Motion i.e., Silicon Motion and Thyssenkrupp go up and down completely randomly.

Pair Corralation between Silicon Motion and Thyssenkrupp

Assuming the 90 days trading horizon Silicon Motion is expected to generate 7.87 times less return on investment than Thyssenkrupp. But when comparing it to its historical volatility, Silicon Motion Technology is 1.28 times less risky than Thyssenkrupp. It trades about 0.03 of its potential returns per unit of risk. thyssenkrupp AG is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  298.00  in thyssenkrupp AG on September 13, 2024 and sell it today you would earn a total of  121.00  from holding thyssenkrupp AG or generate 40.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Silicon Motion Technology  vs.  thyssenkrupp AG

 Performance 
       Timeline  
Silicon Motion Technology 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Motion Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.
thyssenkrupp AG 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in thyssenkrupp AG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Thyssenkrupp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Silicon Motion and Thyssenkrupp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Silicon Motion and Thyssenkrupp

The main advantage of trading using opposite Silicon Motion and Thyssenkrupp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Motion position performs unexpectedly, Thyssenkrupp 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 Thyssenkrupp will offset losses from the drop in Thyssenkrupp's long position.
The idea behind Silicon Motion Technology and thyssenkrupp AG 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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