Correlation Between Silicon Motion and TC Energy

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

Diversification Opportunities for Silicon Motion and TC Energy

-0.2

Correlation Coefficient

Silicon Motion  TC Energy

Good diversification

The 3 months correlation between Silicon and TRS is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and TC Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy 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 TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy has no effect on the direction of Silicon Motion i.e., Silicon Motion and TC Energy go up and down completely randomly.

Pair Corralation between Silicon Motion and TC Energy

Assuming the 90 days trading horizon Silicon Motion is expected to generate 1.3 times less return on investment than TC Energy. In addition to that, Silicon Motion is 1.56 times more volatile than TC Energy. It trades about 0.03 of its total potential returns per unit of risk. TC Energy is currently generating about 0.07 per unit of volatility. If you would invest  4,071  in TC Energy on September 22, 2024 and sell it today you would earn a total of  278.00  from holding TC Energy or generate 6.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Silicon Motion Technology  vs.  TC Energy

Silicon Motion Technology

Risk-Adjusted Performance

2 of 100

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.

TC Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TC Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Silicon Motion and TC Energy

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

The idea behind Silicon Motion Technology and TC Energy 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.