Correlation Between Silicon Motion and Planet Fitness

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

Diversification Opportunities for Silicon Motion and Planet Fitness

0.84

Correlation Coefficient

Silicon Motion  Planet Fitness

Very poor diversification

The 3 months correlation between Silicon and Planet is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Motion Technology and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness 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 Planet Fitness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planet Fitness has no effect on the direction of Silicon Motion i.e., Silicon Motion and Planet Fitness go up and down completely randomly.

Pair Corralation between Silicon Motion and Planet Fitness

Assuming the 90 days trading horizon Silicon Motion Technology is expected to generate 1.37 times more return on investment than Planet Fitness. However, Silicon Motion is 1.37 times more volatile than Planet Fitness. It trades about 0.36 of its potential returns per unit of risk. Planet Fitness is currently generating about 0.11 per unit of risk. If you would invest  3,585  in Silicon Motion Technology on April 23, 2025 and sell it today you would earn a total of  2,765  from holding Silicon Motion Technology or generate 77.13% return on investment over 90 days.

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

Silicon Motion Technology  vs.  Planet Fitness

Silicon Motion Technology

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Motion Technology are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Silicon Motion unveiled solid returns over the last few months and may actually be approaching a breakup point.

Planet Fitness

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Planet Fitness reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Silicon Motion and Planet Fitness

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

The idea behind Silicon Motion Technology and Planet Fitness 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.