Correlation Between Silicon Power and U Media

Can any of the company-specific risk be diversified away by investing in both Silicon Power and U Media 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 U Media 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 U Media Communications, you can compare the effects of market volatilities on Silicon Power and U Media 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 U Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Power and U Media.

Diversification Opportunities for Silicon Power and U Media

0.09

Correlation Coefficient

Silicon Power  U Media

Significant diversification

The 3 months correlation between Silicon and 6470 is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Power Computer and U Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Media Communications 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 U Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Media Communications has no effect on the direction of Silicon Power i.e., Silicon Power and U Media go up and down completely randomly.

Pair Corralation between Silicon Power and U Media

Assuming the 90 days trading horizon Silicon Power is expected to generate 2.7 times less return on investment than U Media. But when comparing it to its historical volatility, Silicon Power Computer is 1.11 times less risky than U Media. It trades about 0.05 of its potential returns per unit of risk. U Media Communications is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,760  in U Media Communications on September 5, 2024 and sell it today you would earn a total of  590.00  from holding U Media Communications or generate 12.39% return on investment over 90 days.

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

Silicon Power Computer  vs.  U Media Communications

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.

U Media Communications

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in U Media Communications are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Media showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Silicon Power and U Media

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

The idea behind Silicon Power Computer and U Media Communications 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.