Correlation Between Silicon Motion and AstraZeneca PLC

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

Diversification Opportunities for Silicon Motion and AstraZeneca PLC

0.16

Correlation Coefficient

Silicon Motion  AstraZeneca PLC

Average diversification

The 3 months correlation between Silicon and AstraZeneca is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC has no effect on the direction of Silicon Motion i.e., Silicon Motion and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Silicon Motion and AstraZeneca PLC

Assuming the 90 days trading horizon Silicon Motion Technology is expected to under-perform the AstraZeneca PLC. In addition to that, Silicon Motion is 1.85 times more volatile than AstraZeneca PLC. It trades about -0.02 of its total potential returns per unit of risk. AstraZeneca PLC is currently generating about 0.1 per unit of volatility. If you would invest  12,547  in AstraZeneca PLC on December 26, 2024 and sell it today you would earn a total of  1,063  from holding AstraZeneca PLC or generate 8.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Silicon Motion Technology  vs.  AstraZeneca PLC

Silicon Motion Technology

Risk-Adjusted Performance

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

AstraZeneca PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, AstraZeneca PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Silicon Motion and AstraZeneca PLC

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

The idea behind Silicon Motion Technology and AstraZeneca PLC 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.