Correlation Between Silicon Motion and Corporate Office

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

Diversification Opportunities for Silicon Motion and Corporate Office

0.38

Correlation Coefficient

Silicon Motion  Corporate Office

Weak diversification

The 3 months correlation between Silicon and Corporate is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Corporate Office Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporate Office Pro 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 Corporate Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporate Office Pro has no effect on the direction of Silicon Motion i.e., Silicon Motion and Corporate Office go up and down completely randomly.

Pair Corralation between Silicon Motion and Corporate Office

Assuming the 90 days trading horizon Silicon Motion is expected to generate 68.43 times less return on investment than Corporate Office. In addition to that, Silicon Motion is 1.61 times more volatile than Corporate Office Properties. It trades about 0.0 of its total potential returns per unit of risk. Corporate Office Properties is currently generating about 0.07 per unit of volatility. If you would invest  2,000  in Corporate Office Properties on October 24, 2024 and sell it today you would earn a total of  860.00  from holding Corporate Office Properties or generate 43.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.76%
Values	Daily Returns

Silicon Motion Technology  vs.  Corporate Office Properties

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.

Corporate Office Pro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Corporate Office Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Corporate Office 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 Corporate Office

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

The idea behind Silicon Motion Technology and Corporate Office Properties 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.