Correlation Between Silicom and EchoStar

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

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

Diversification Opportunities for Silicom and EchoStar

0.04

Correlation Coefficient

Silicom  EchoStar

Significant diversification

The 3 months correlation between Silicom and EchoStar is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Silicom and EchoStar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EchoStar and Silicom 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 Silicom are associated (or correlated) with EchoStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EchoStar has no effect on the direction of Silicom i.e., Silicom and EchoStar go up and down completely randomly.

Pair Corralation between Silicom and EchoStar

Given the investment horizon of 90 days Silicom is expected to generate 3.66 times less return on investment than EchoStar. But when comparing it to its historical volatility, Silicom is 2.29 times less risky than EchoStar. It trades about 0.11 of its potential returns per unit of risk. EchoStar is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,356  in EchoStar on February 5, 2024 and sell it today you would earn a total of  389.00  from holding EchoStar or generate 28.69% return on investment over 90 days.

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

Silicom  vs.  EchoStar

Silicom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silicom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Silicom is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

EchoStar

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EchoStar are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, EchoStar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Silicom and EchoStar

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

The idea behind Silicom and EchoStar 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.