Correlation Between Silicon Motion and Himax Technologies

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

Diversification Opportunities for Silicon Motion and Himax Technologies

0.28

Correlation Coefficient

Silicon Motion  Himax Technologies

Modest diversification

The 3 months correlation between Silicon and Himax is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Himax Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Himax Technologies 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 Himax Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Himax Technologies has no effect on the direction of Silicon Motion i.e., Silicon Motion and Himax Technologies go up and down completely randomly.

Pair Corralation between Silicon Motion and Himax Technologies

Given the investment horizon of 90 days Silicon Motion Technology is expected to under-perform the Himax Technologies. In addition to that, Silicon Motion is 1.14 times more volatile than Himax Technologies. It trades about -0.05 of its total potential returns per unit of risk. Himax Technologies is currently generating about -0.01 per unit of volatility. If you would invest  556.00  in Himax Technologies on September 3, 2024 and sell it today you would lose (16.00) from holding Himax Technologies or give up 2.88% 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.  Himax Technologies

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Himax Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Himax Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Himax Technologies is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Silicon Motion and Himax Technologies

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

The idea behind Silicon Motion Technology and Himax Technologies 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.