Correlation Between Silicon Motion and Vishay Intertechnology

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

Diversification Opportunities for Silicon Motion and Vishay Intertechnology

0.77

Correlation Coefficient

Silicon Motion  Vishay Intertechnology

Poor diversification

The 3 months correlation between Silicon and Vishay is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Vishay Intertechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vishay Intertechnology 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 Vishay Intertechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vishay Intertechnology has no effect on the direction of Silicon Motion i.e., Silicon Motion and Vishay Intertechnology go up and down completely randomly.

Pair Corralation between Silicon Motion and Vishay Intertechnology

Given the investment horizon of 90 days Silicon Motion Technology is expected to under-perform the Vishay Intertechnology. In addition to that, Silicon Motion is 1.04 times more volatile than Vishay Intertechnology. It trades about -0.02 of its total potential returns per unit of risk. Vishay Intertechnology is currently generating about -0.01 per unit of volatility. If you would invest  1,674  in Vishay Intertechnology on December 28, 2024 and sell it today you would lose (56.00) from holding Vishay Intertechnology or give up 3.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Silicon Motion Technology  vs.  Vishay Intertechnology

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.

Vishay Intertechnology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vishay Intertechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vishay Intertechnology is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Silicon Motion and Vishay Intertechnology

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

The idea behind Silicon Motion Technology and Vishay Intertechnology 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.