Correlation Between Silicon Motion and Photronics

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

Diversification Opportunities for Silicon Motion and Photronics

0.23

Correlation Coefficient

Silicon Motion  Photronics

Modest diversification

The 3 months correlation between Silicon and Photronics is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Photronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photronics 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 Photronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photronics has no effect on the direction of Silicon Motion i.e., Silicon Motion and Photronics go up and down completely randomly.

Pair Corralation between Silicon Motion and Photronics

Given the investment horizon of 90 days Silicon Motion Technology is expected to generate 0.69 times more return on investment than Photronics. However, Silicon Motion Technology is 1.45 times less risky than Photronics. It trades about 0.24 of its potential returns per unit of risk. Photronics is currently generating about 0.0 per unit of risk. If you would invest  5,670  in Silicon Motion Technology on May 12, 2025 and sell it today you would earn a total of  1,968  from holding Silicon Motion Technology or generate 34.71% return on investment over 90 days.

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

Silicon Motion Technology  vs.  Photronics

Silicon Motion Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Motion Technology are ranked lower than 19 (%) 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.

Photronics

Risk-Adjusted Performance

Weakest

Over the last 90 days Photronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Photronics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Silicon Motion and Photronics

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

The idea behind Silicon Motion Technology and Photronics 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.