Correlation Between Silicon Motion and ASE Industrial

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

Diversification Opportunities for Silicon Motion and ASE Industrial

0.32

Correlation Coefficient

Silicon Motion  ASE Industrial

Weak diversification

The 3 months correlation between Silicon and ASE is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding 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 ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of Silicon Motion i.e., Silicon Motion and ASE Industrial go up and down completely randomly.

Pair Corralation between Silicon Motion and ASE Industrial

Given the investment horizon of 90 days Silicon Motion Technology is expected to generate 0.98 times more return on investment than ASE Industrial. However, Silicon Motion Technology is 1.02 times less risky than ASE Industrial. It trades about 0.02 of its potential returns per unit of risk. ASE Industrial Holding is currently generating about -0.04 per unit of risk. If you would invest  5,435  in Silicon Motion Technology on December 27, 2024 and sell it today you would earn a total of  41.00  from holding Silicon Motion Technology or generate 0.75% return on investment over 90 days.

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

Silicon Motion Technology  vs.  ASE Industrial Holding

Silicon Motion Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Motion Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

ASE Industrial Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASE Industrial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Silicon Motion and ASE Industrial

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

The idea behind Silicon Motion Technology and ASE Industrial Holding 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.