Correlation Between Silicon Laboratories and Synaptics Incorporated

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

Diversification Opportunities for Silicon Laboratories and Synaptics Incorporated

-0.42

Correlation Coefficient

Silicon Laboratories  Synaptics Incorporated

Very good diversification

The 3 months correlation between Silicon and Synaptics is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Laboratories and Synaptics Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synaptics Incorporated 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 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 Laboratories i.e., Silicon Laboratories and Synaptics Incorporated go up and down completely randomly.

Pair Corralation between Silicon Laboratories and Synaptics Incorporated

Given the investment horizon of 90 days Silicon Laboratories is expected to generate 0.81 times more return on investment than Synaptics Incorporated. However, Silicon Laboratories is 1.24 times less risky than Synaptics Incorporated. It trades about 0.12 of its potential returns per unit of risk. Synaptics Incorporated is currently generating about -0.11 per unit of risk. If you would invest  11,154  in Silicon Laboratories on December 4, 2024 and sell it today you would earn a total of  2,242  from holding Silicon Laboratories or generate 20.1% return on investment over 90 days.

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

Silicon Laboratories  vs.  Synaptics Incorporated

Silicon Laboratories

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Laboratories are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Silicon Laboratories sustained solid returns over the last few months and may actually be approaching a breakup point.

Synaptics Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Synaptics Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Silicon Laboratories and Synaptics Incorporated

The main advantage of trading using opposite Silicon Laboratories and Synaptics Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Laboratories 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 Laboratories 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.