Correlation Between Silicon Motion and SemiLEDS

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

Diversification Opportunities for Silicon Motion and SemiLEDS

0.74

Correlation Coefficient

Silicon Motion  SemiLEDS

Poor diversification

The 3 months correlation between Silicon and SemiLEDS is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and SemiLEDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SemiLEDS 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 SemiLEDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SemiLEDS has no effect on the direction of Silicon Motion i.e., Silicon Motion and SemiLEDS go up and down completely randomly.

Pair Corralation between Silicon Motion and SemiLEDS

Given the investment horizon of 90 days Silicon Motion Technology is expected to generate 0.41 times more return on investment than SemiLEDS. However, Silicon Motion Technology is 2.45 times less risky than SemiLEDS. It trades about 0.14 of its potential returns per unit of risk. SemiLEDS is currently generating about -0.23 per unit of risk. If you would invest  6,996  in Silicon Motion Technology on April 20, 2025 and sell it today you would earn a total of  336.00  from holding Silicon Motion Technology or generate 4.8% return on investment over 90 days.

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

Silicon Motion Technology  vs.  SemiLEDS

Silicon Motion Technology

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Motion Technology are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. 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.

SemiLEDS

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SemiLEDS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, SemiLEDS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Silicon Motion and SemiLEDS

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

The idea behind Silicon Motion Technology and SemiLEDS 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.