Correlation Between Silicon Motion and Algonquin Power

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

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

Diversification Opportunities for Silicon Motion and Algonquin Power

0.39

Correlation Coefficient

Silicon Motion  Algonquin Power

Weak diversification

The 3 months correlation between Silicon and Algonquin is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities and Silicon Motion 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 Motion Technology are associated (or correlated) with Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of Silicon Motion i.e., Silicon Motion and Algonquin Power go up and down completely randomly.

Pair Corralation between Silicon Motion and Algonquin Power

Assuming the 90 days trading horizon Silicon Motion Technology is expected to under-perform the Algonquin Power. In addition to that, Silicon Motion is 1.52 times more volatile than Algonquin Power Utilities. It trades about -0.05 of its total potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.01 per unit of volatility. If you would invest  470.00  in Algonquin Power Utilities on September 3, 2024 and sell it today you would lose (6.00) from holding Algonquin Power Utilities or give up 1.28% of portfolio value over 90 days.

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

Silicon Motion Technology  vs.  Algonquin Power Utilities

Silicon Motion Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silicon Motion Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Algonquin Power Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Algonquin Power Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Algonquin Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Silicon Motion and Algonquin Power

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

The idea behind Silicon Motion Technology and Algonquin Power Utilities 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.