Correlation Between Silicon Laboratories and Alpha

Can any of the company-specific risk be diversified away by investing in both Silicon Laboratories and Alpha 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 Laboratories and Alpha into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Silicon Laboratories and Alpha and Omega, you can compare the effects of market volatilities on Silicon Laboratories and Alpha 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 Laboratories with a short position of Alpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Laboratories and Alpha.

Diversification Opportunities for Silicon Laboratories and Alpha

0.62

Correlation Coefficient

Silicon Laboratories  Alpha

Poor diversification

The 3 months correlation between Silicon and Alpha is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Laboratories and Alpha and Omega in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha and Omega and Silicon Laboratories 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 Laboratories are associated (or correlated) with Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha and Omega has no effect on the direction of Silicon Laboratories i.e., Silicon Laboratories and Alpha go up and down completely randomly.

Pair Corralation between Silicon Laboratories and Alpha

Given the investment horizon of 90 days Silicon Laboratories is expected to generate 1.58 times less return on investment than Alpha. But when comparing it to its historical volatility, Silicon Laboratories is 3.04 times less risky than Alpha. It trades about 0.4 of its potential returns per unit of risk. Alpha and Omega is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,062  in Alpha and Omega on September 19, 2024 and sell it today you would earn a total of  1,189  from holding Alpha and Omega or generate 38.83% return on investment over 90 days.

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

Silicon Laboratories  vs.  Alpha and Omega

Silicon Laboratories

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Laboratories are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Silicon Laboratories sustained solid returns over the last few months and may actually be approaching a breakup point.

Alpha and Omega

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha and Omega are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Alpha disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Silicon Laboratories and Alpha

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

The idea behind Silicon Laboratories and Alpha and Omega 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.