Correlation Between Silicon Laboratories and Lattice Semiconductor

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

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

Diversification Opportunities for Silicon Laboratories and Lattice Semiconductor

0.41

Correlation Coefficient

Silicon Laboratories  Lattice Semiconductor

Very weak diversification

The 3 months correlation between Silicon and Lattice is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Laboratories and Lattice Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lattice Semiconductor 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 Lattice Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lattice Semiconductor has no effect on the direction of Silicon Laboratories i.e., Silicon Laboratories and Lattice Semiconductor go up and down completely randomly.

Pair Corralation between Silicon Laboratories and Lattice Semiconductor

Given the investment horizon of 90 days Silicon Laboratories is expected to under-perform the Lattice Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Silicon Laboratories is 1.05 times less risky than Lattice Semiconductor. The stock trades about -0.05 of its potential returns per unit of risk. The Lattice Semiconductor is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  5,672  in Lattice Semiconductor on December 29, 2024 and sell it today you would lose (142.00) from holding Lattice Semiconductor or give up 2.5% of portfolio value over 90 days.

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

Silicon Laboratories  vs.  Lattice Semiconductor

Silicon Laboratories

Risk-Adjusted Performance

Very Weak

Over the last 90 days Silicon Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Lattice Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lattice Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Lattice Semiconductor is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Silicon Laboratories and Lattice Semiconductor

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

The idea behind Silicon Laboratories and Lattice Semiconductor 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.