Correlation Between Silicon Motion and GSI Technology

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

Diversification Opportunities for Silicon Motion and GSI Technology

0.35

Correlation Coefficient

Silicon Motion  GSI Technology

Weak diversification

The 3 months correlation between Silicon and GSI is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and GSI Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSI Technology 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 GSI Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSI Technology has no effect on the direction of Silicon Motion i.e., Silicon Motion and GSI Technology go up and down completely randomly.

Pair Corralation between Silicon Motion and GSI Technology

Given the investment horizon of 90 days Silicon Motion Technology is expected to generate 0.36 times more return on investment than GSI Technology. However, Silicon Motion Technology is 2.81 times less risky than GSI Technology. It trades about -0.02 of its potential returns per unit of risk. GSI Technology is currently generating about -0.05 per unit of risk. If you would invest  5,410  in Silicon Motion Technology on December 28, 2024 and sell it today you would lose (248.00) from holding Silicon Motion Technology or give up 4.58% of portfolio value over 90 days.

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

Silicon Motion Technology  vs.  GSI Technology

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 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.

GSI Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days GSI Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Silicon Motion and GSI Technology

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

The idea behind Silicon Motion Technology and GSI 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.