Correlation Between Silicon Motion and Equity LifeStyle

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

Diversification Opportunities for Silicon Motion and Equity LifeStyle

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Silicon and Equity is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Equity LifeStyle Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity LifeStyle Pro 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 Equity LifeStyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity LifeStyle Pro has no effect on the direction of Silicon Motion i.e., Silicon Motion and Equity LifeStyle go up and down completely randomly.

Pair Corralation between Silicon Motion and Equity LifeStyle

Assuming the 90 days trading horizon Silicon Motion Technology is expected to generate 2.94 times more return on investment than Equity LifeStyle. However, Silicon Motion is 2.94 times more volatile than Equity LifeStyle Properties. It trades about 0.07 of its potential returns per unit of risk. Equity LifeStyle Properties is currently generating about -0.26 per unit of risk. If you would invest  4,940  in Silicon Motion Technology on September 28, 2024 and sell it today you would earn a total of  160.00  from holding Silicon Motion Technology or generate 3.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Silicon Motion Technology  vs.  Equity LifeStyle Properties

 Performance 
       Timeline  
Silicon Motion Technology 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 comparatively stable basic indicators, Silicon Motion is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
Equity LifeStyle Pro 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Equity LifeStyle Properties are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Equity LifeStyle is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Silicon Motion and Equity LifeStyle Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Silicon Motion and Equity LifeStyle

The main advantage of trading using opposite Silicon Motion and Equity LifeStyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Motion position performs unexpectedly, Equity LifeStyle 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 Equity LifeStyle will offset losses from the drop in Equity LifeStyle's long position.
The idea behind Silicon Motion Technology and Equity LifeStyle Properties 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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