Correlation Between Silicon Motion and WESTLAKE CHEMICAL

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

Diversification Opportunities for Silicon Motion and WESTLAKE CHEMICAL

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Silicon and WESTLAKE is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and WESTLAKE CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTLAKE CHEMICAL 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 WESTLAKE CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTLAKE CHEMICAL has no effect on the direction of Silicon Motion i.e., Silicon Motion and WESTLAKE CHEMICAL go up and down completely randomly.

Pair Corralation between Silicon Motion and WESTLAKE CHEMICAL

Assuming the 90 days trading horizon Silicon Motion Technology is expected to under-perform the WESTLAKE CHEMICAL. In addition to that, Silicon Motion is 1.67 times more volatile than WESTLAKE CHEMICAL. It trades about -0.08 of its total potential returns per unit of risk. WESTLAKE CHEMICAL is currently generating about -0.07 per unit of volatility. If you would invest  13,045  in WESTLAKE CHEMICAL on August 31, 2024 and sell it today you would lose (845.00) from holding WESTLAKE CHEMICAL or give up 6.48% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.46%
ValuesDaily Returns

Silicon Motion Technology  vs.  WESTLAKE CHEMICAL

 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 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.
WESTLAKE CHEMICAL 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days WESTLAKE CHEMICAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WESTLAKE CHEMICAL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Silicon Motion and WESTLAKE CHEMICAL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Silicon Motion and WESTLAKE CHEMICAL

The main advantage of trading using opposite Silicon Motion and WESTLAKE CHEMICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Motion position performs unexpectedly, WESTLAKE CHEMICAL 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 WESTLAKE CHEMICAL will offset losses from the drop in WESTLAKE CHEMICAL's long position.
The idea behind Silicon Motion Technology and WESTLAKE CHEMICAL 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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