Correlation Between Semtech and Silicon Laboratories

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

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

Diversification Opportunities for Semtech and Silicon Laboratories

0.5

Correlation Coefficient

Semtech  Silicon Laboratories

Very weak diversification

The 3 months correlation between Semtech and Silicon is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Semtech and Silicon Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Laboratories and Semtech 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 Semtech 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 Semtech i.e., Semtech and Silicon Laboratories go up and down completely randomly.

Pair Corralation between Semtech and Silicon Laboratories

Given the investment horizon of 90 days Semtech is expected to generate 1.2 times more return on investment than Silicon Laboratories. However, Semtech is 1.2 times more volatile than Silicon Laboratories. It trades about 0.16 of its potential returns per unit of risk. Silicon Laboratories is currently generating about 0.01 per unit of risk. If you would invest  3,822  in Semtech on May 12, 2025 and sell it today you would earn a total of  1,263  from holding Semtech or generate 33.05% return on investment over 90 days.

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

Semtech  vs.  Silicon Laboratories

Semtech

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Semtech are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Semtech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Silicon Laboratories

Risk-Adjusted Performance

Weakest

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

Pair Trading with Semtech and Silicon Laboratories

The main advantage of trading using opposite Semtech and Silicon Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Semtech 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 Semtech 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.