Correlation Between Silicon Motion and Synaptics Incorporated

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

Diversification Opportunities for Silicon Motion and Synaptics Incorporated

0.3

Correlation Coefficient

Silicon Motion  Synaptics Incorporated

Weak diversification

The 3 months correlation between Silicon and Synaptics is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Synaptics Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synaptics Incorporated 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 Synaptics Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synaptics Incorporated has no effect on the direction of Silicon Motion i.e., Silicon Motion and Synaptics Incorporated go up and down completely randomly.

Pair Corralation between Silicon Motion and Synaptics Incorporated

Given the investment horizon of 90 days Silicon Motion Technology is expected to under-perform the Synaptics Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, Silicon Motion Technology is 1.17 times less risky than Synaptics Incorporated. The stock trades about -0.06 of its potential returns per unit of risk. The Synaptics Incorporated is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,283  in Synaptics Incorporated on August 31, 2024 and sell it today you would earn a total of  553.00  from holding Synaptics Incorporated or generate 7.59% 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.  Synaptics Incorporated

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.

Synaptics Incorporated

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Synaptics Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Synaptics Incorporated may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Silicon Motion and Synaptics Incorporated

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

The idea behind Silicon Motion Technology and Synaptics Incorporated 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.