Correlation Between Silicom and AudioCodes

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

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

Diversification Opportunities for Silicom and AudioCodes

-0.53

Correlation Coefficient

Silicom  AudioCodes

Excellent diversification

The 3 months correlation between Silicom and AudioCodes is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Silicom and AudioCodes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AudioCodes and Silicom 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 Silicom are associated (or correlated) with AudioCodes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AudioCodes has no effect on the direction of Silicom i.e., Silicom and AudioCodes go up and down completely randomly.

Pair Corralation between Silicom and AudioCodes

Given the investment horizon of 90 days Silicom is expected to generate 0.9 times more return on investment than AudioCodes. However, Silicom is 1.11 times less risky than AudioCodes. It trades about 0.03 of its potential returns per unit of risk. AudioCodes is currently generating about -0.07 per unit of risk. If you would invest  1,300  in Silicom on August 30, 2024 and sell it today you would earn a total of  31.00  from holding Silicom or generate 2.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Silicom  vs.  AudioCodes

Silicom

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Silicom are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Silicom is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

AudioCodes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AudioCodes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Silicom and AudioCodes

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

The idea behind Silicom and AudioCodes 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.