Correlation Between SGH Old and Silicon Motion

Can any of the company-specific risk be diversified away by investing in both SGH Old and Silicon Motion 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 SGH Old and Silicon Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SGH Old and Silicon Motion Technology, you can compare the effects of market volatilities on SGH Old and Silicon Motion 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 SGH Old with a short position of Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of SGH Old and Silicon Motion.

Diversification Opportunities for SGH Old and Silicon Motion

-0.07

Correlation Coefficient

SGH Old  Silicon Motion

Good diversification

The 3 months correlation between SGH and Silicon is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding SGH Old and Silicon Motion Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Motion Technology and SGH Old 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 SGH Old are associated (or correlated) with Silicon Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Motion Technology has no effect on the direction of SGH Old i.e., SGH Old and Silicon Motion go up and down completely randomly.

Pair Corralation between SGH Old and Silicon Motion

Considering the 90-day investment horizon SGH Old is expected to generate 1.43 times more return on investment than Silicon Motion. However, SGH Old is 1.43 times more volatile than Silicon Motion Technology. It trades about 0.03 of its potential returns per unit of risk. Silicon Motion Technology is currently generating about 0.01 per unit of risk. If you would invest  1,665  in SGH Old on October 9, 2024 and sell it today you would earn a total of  376.00  from holding SGH Old or generate 22.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.71%
Values	Daily Returns

SGH Old  vs.  Silicon Motion Technology

SGH Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGH Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 very healthy primary indicators, Silicon Motion is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SGH Old and Silicon Motion

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

The idea behind SGH Old and Silicon Motion Technology 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.