Correlation Between Silicom and ClearOne

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

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

Diversification Opportunities for Silicom and ClearOne

-0.1

Correlation Coefficient

Silicom  ClearOne

Good diversification

The 3 months correlation between Silicom and ClearOne is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Silicom and ClearOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClearOne 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 ClearOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClearOne has no effect on the direction of Silicom i.e., Silicom and ClearOne go up and down completely randomly.

Pair Corralation between Silicom and ClearOne

Given the investment horizon of 90 days Silicom is expected to under-perform the ClearOne. But the stock apears to be less risky and, when comparing its historical volatility, Silicom is 3.76 times less risky than ClearOne. The stock trades about 0.0 of its potential returns per unit of risk. The ClearOne is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  63.00  in ClearOne on December 30, 2024 and sell it today you would lose (2.00) from holding ClearOne or give up 3.17% of portfolio value over 90 days.

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

Silicom  vs.  ClearOne

Silicom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Silicom has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

ClearOne

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ClearOne are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, ClearOne displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Silicom and ClearOne

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

The idea behind Silicom and ClearOne 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.