Correlation Between Valens and Silicon Laboratories

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

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

Diversification Opportunities for Valens and Silicon Laboratories

0.29

Correlation Coefficient

Valens  Silicon Laboratories

Modest diversification

The 3 months correlation between Valens and Silicon is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Valens and Silicon Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Laboratories and Valens 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 Valens are associated (or correlated) with Silicon Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Laboratories has no effect on the direction of Valens i.e., Valens and Silicon Laboratories go up and down completely randomly.

Pair Corralation between Valens and Silicon Laboratories

Considering the 90-day investment horizon Valens is expected to under-perform the Silicon Laboratories. In addition to that, Valens is 1.53 times more volatile than Silicon Laboratories. It trades about -0.09 of its total potential returns per unit of risk. Silicon Laboratories is currently generating about -0.01 per unit of volatility. If you would invest  12,486  in Silicon Laboratories on December 28, 2024 and sell it today you would lose (529.00) from holding Silicon Laboratories or give up 4.24% of portfolio value over 90 days.

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

Valens  vs.  Silicon Laboratories

Valens

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 somewhat strong basic indicators, Silicon Laboratories is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Valens and Silicon Laboratories

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

The idea behind Valens and Silicon Laboratories 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.