Correlation Between Silicon Laboratories and Skyworks Solutions

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

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

Diversification Opportunities for Silicon Laboratories and Skyworks Solutions

0.65

Correlation Coefficient

Silicon Laboratories  Skyworks Solutions

Poor diversification

The 3 months correlation between Silicon and Skyworks is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Laboratories and Skyworks Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyworks Solutions and Silicon Laboratories 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 Laboratories are associated (or correlated) with Skyworks Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyworks Solutions has no effect on the direction of Silicon Laboratories i.e., Silicon Laboratories and Skyworks Solutions go up and down completely randomly.

Pair Corralation between Silicon Laboratories and Skyworks Solutions

Given the investment horizon of 90 days Silicon Laboratories is expected to generate 1.36 times more return on investment than Skyworks Solutions. However, Silicon Laboratories is 1.36 times more volatile than Skyworks Solutions. It trades about 0.03 of its potential returns per unit of risk. Skyworks Solutions is currently generating about -0.12 per unit of risk. If you would invest  10,634  in Silicon Laboratories on August 31, 2024 and sell it today you would earn a total of  244.00  from holding Silicon Laboratories or generate 2.29% return on investment over 90 days.

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

Silicon Laboratories  vs.  Skyworks Solutions

Silicon Laboratories

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Laboratories are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Silicon Laboratories is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Skyworks Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skyworks Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Silicon Laboratories and Skyworks Solutions

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

The idea behind Silicon Laboratories and Skyworks Solutions 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 Transaction History module to view history of all your transactions and understand their impact on performance.