Correlation Between Strategic Education and Silicon Motion

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

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

Diversification Opportunities for Strategic Education and Silicon Motion

0.0

Correlation Coefficient

Strategic Education  Silicon Motion

Pay attention - limited upside

The 3 months correlation between Strategic and Silicon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Education and Silicon Motion Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Motion Technology and Strategic Education 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 Strategic Education are associated (or correlated) with Silicon Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Motion Technology has no effect on the direction of Strategic Education i.e., Strategic Education and Silicon Motion go up and down completely randomly.

Pair Corralation between Strategic Education and Silicon Motion

Assuming the 90 days horizon Strategic Education is expected to generate 0.9 times more return on investment than Silicon Motion. However, Strategic Education is 1.11 times less risky than Silicon Motion. It trades about -0.03 of its potential returns per unit of risk. Silicon Motion Technology is currently generating about -0.07 per unit of risk. If you would invest  9,964  in Strategic Education on September 30, 2024 and sell it today you would lose (1,114) from holding Strategic Education or give up 11.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Strategic Education  vs.  Silicon Motion Technology

Strategic Education

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Education are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Strategic Education may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Silicon Motion Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Motion Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Silicon Motion is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Strategic Education and Silicon Motion

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

The idea behind Strategic Education and Silicon Motion Technology 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.