Correlation Between X FAB and Silicon Motion

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

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

Diversification Opportunities for X FAB and Silicon Motion

0.86

Correlation Coefficient

X FAB  Silicon Motion

Very poor diversification

The 3 months correlation between XFB and Silicon is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries 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 X FAB 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 X FAB Silicon Foundries 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 X FAB i.e., X FAB and Silicon Motion go up and down completely randomly.

Pair Corralation between X FAB and Silicon Motion

Assuming the 90 days trading horizon X FAB is expected to generate 1.66 times less return on investment than Silicon Motion. But when comparing it to its historical volatility, X FAB Silicon Foundries is 1.12 times less risky than Silicon Motion. It trades about 0.22 of its potential returns per unit of risk. 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 Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

X FAB Silicon Foundries  vs.  Silicon Motion Technology

X FAB Silicon

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, X FAB exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 X FAB and Silicon Motion

The main advantage of trading using opposite X FAB and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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 X FAB Silicon Foundries 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 Commodity Directory module to find actively traded commodities issued by global exchanges.