Correlation Between Weebit Nano and Silicon Laboratories

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

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

Diversification Opportunities for Weebit Nano and Silicon Laboratories

-0.15

Correlation Coefficient

Weebit Nano  Silicon Laboratories

Good diversification

The 3 months correlation between Weebit and Silicon is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Weebit Nano Limited and Silicon Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Laboratories and Weebit Nano 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 Weebit Nano Limited 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 Weebit Nano i.e., Weebit Nano and Silicon Laboratories go up and down completely randomly.

Pair Corralation between Weebit Nano and Silicon Laboratories

Assuming the 90 days horizon Weebit Nano Limited is expected to under-perform the Silicon Laboratories. In addition to that, Weebit Nano is 1.96 times more volatile than Silicon Laboratories. It trades about -0.06 of its total potential returns per unit of risk. Silicon Laboratories is currently generating about 0.4 per unit of volatility. If you would invest  10,071  in Silicon Laboratories on September 19, 2024 and sell it today you would earn a total of  2,825  from holding Silicon Laboratories or generate 28.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Weebit Nano Limited  vs.  Silicon Laboratories

Weebit Nano Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Weebit Nano Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Weebit Nano reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Weebit Nano and Silicon Laboratories

The main advantage of trading using opposite Weebit Nano and Silicon Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weebit Nano 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 Weebit Nano Limited 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.