Correlation Between Alpha and Silicon Laboratories

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

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

Diversification Opportunities for Alpha and Silicon Laboratories

0.89

Correlation Coefficient

Alpha  Silicon Laboratories

Very poor diversification

The 3 months correlation between Alpha and Silicon is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Alpha and Omega and Silicon Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Laboratories and Alpha 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 Alpha and Omega are associated (or correlated) with Silicon Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Laboratories has no effect on the direction of Alpha i.e., Alpha and Silicon Laboratories go up and down completely randomly.

Pair Corralation between Alpha and Silicon Laboratories

Given the investment horizon of 90 days Alpha and Omega is expected to generate 1.22 times more return on investment than Silicon Laboratories. However, Alpha is 1.22 times more volatile than Silicon Laboratories. It trades about 0.19 of its potential returns per unit of risk. Silicon Laboratories is currently generating about 0.18 per unit of risk. If you would invest  1,941  in Alpha and Omega on May 1, 2025 and sell it today you would earn a total of  800.00  from holding Alpha and Omega or generate 41.22% return on investment over 90 days.

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

Alpha and Omega  vs.  Silicon Laboratories

Alpha and Omega

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha and Omega are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Alpha disclosed solid returns over the last few months and may actually be approaching a breakup point.

Silicon Laboratories

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Laboratories are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Silicon Laboratories sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alpha and Silicon Laboratories

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

The idea behind Alpha and Omega and Silicon Laboratories 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..