Correlation Between Silicon Power and AVerMedia Technologies

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

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

Diversification Opportunities for Silicon Power and AVerMedia Technologies

0.5

Correlation Coefficient

Silicon Power  AVerMedia Technologies

Very weak diversification

The 3 months correlation between Silicon and AVerMedia is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Power Computer and AVerMedia Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVerMedia Technologies and Silicon Power 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 Power Computer are associated (or correlated) with AVerMedia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVerMedia Technologies has no effect on the direction of Silicon Power i.e., Silicon Power and AVerMedia Technologies go up and down completely randomly.

Pair Corralation between Silicon Power and AVerMedia Technologies

Assuming the 90 days trading horizon Silicon Power Computer is expected to generate 0.87 times more return on investment than AVerMedia Technologies. However, Silicon Power Computer is 1.14 times less risky than AVerMedia Technologies. It trades about 0.05 of its potential returns per unit of risk. AVerMedia Technologies is currently generating about -0.07 per unit of risk. If you would invest  3,165  in Silicon Power Computer on September 5, 2024 and sell it today you would earn a total of  125.00  from holding Silicon Power Computer or generate 3.95% return on investment over 90 days.

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

Silicon Power Computer  vs.  AVerMedia Technologies

Silicon Power Computer

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Power Computer are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Silicon Power is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

AVerMedia Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVerMedia Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Silicon Power and AVerMedia Technologies

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

The idea behind Silicon Power Computer and AVerMedia Technologies 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 Stocks Directory module to find actively traded stocks across global markets.