Correlation Between Boston Beer and Silicon Motion

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

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

Diversification Opportunities for Boston Beer and Silicon Motion

-0.76

Correlation Coefficient

Boston Beer  Silicon Motion

Pay attention - limited upside

The 3 months correlation between Boston and Silicon is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer 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 Boston Beer 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 The Boston Beer 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 Boston Beer i.e., Boston Beer and Silicon Motion go up and down completely randomly.

Pair Corralation between Boston Beer and Silicon Motion

Assuming the 90 days trading horizon The Boston Beer is expected to under-perform the Silicon Motion. But the stock apears to be less risky and, when comparing its historical volatility, The Boston Beer is 1.39 times less risky than Silicon Motion. The stock trades about -0.19 of its potential returns per unit of risk. The Silicon Motion Technology is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  3,585  in Silicon Motion Technology on April 24, 2025 and sell it today you would earn a total of  2,465  from holding Silicon Motion Technology or generate 68.76% return on investment over 90 days.

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

The Boston Beer  vs.  Silicon Motion Technology

Boston Beer

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Silicon Motion unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Beer and Silicon Motion

The main advantage of trading using opposite Boston Beer and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer 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 The Boston Beer 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.