Correlation Between Infosys and Silicon Motion

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

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

Diversification Opportunities for Infosys and Silicon Motion

-0.5

Correlation Coefficient

Infosys  Silicon Motion

Very good diversification

The 3 months correlation between Infosys and Silicon is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Infosys Ltd ADR and Silicon Motion Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Motion Technology and Infosys 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 Infosys Ltd ADR are associated (or correlated) with Silicon Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Motion Technology has no effect on the direction of Infosys i.e., Infosys and Silicon Motion go up and down completely randomly.

Pair Corralation between Infosys and Silicon Motion

Given the investment horizon of 90 days Infosys Ltd ADR is expected to under-perform the Silicon Motion. But the stock apears to be less risky and, when comparing its historical volatility, Infosys Ltd ADR is 1.48 times less risky than Silicon Motion. The stock trades about -0.05 of its potential returns per unit of risk. The Silicon Motion Technology is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,316  in Silicon Motion Technology on May 26, 2025 and sell it today you would earn a total of  1,327  from holding Silicon Motion Technology or generate 21.01% return on investment over 90 days.

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

Infosys Ltd ADR  vs.  Silicon Motion Technology

Infosys Ltd ADR

Risk-Adjusted Performance

Weakest

Over the last 90 days Infosys Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Infosys is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Silicon Motion Technology

Risk-Adjusted Performance

Good

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 very weak primary indicators, Silicon Motion displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Infosys and Silicon Motion

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

The idea behind Infosys Ltd ADR and Silicon Motion Technology 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.