Correlation Between Alpha and MagnaChip Semiconductor

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

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

Diversification Opportunities for Alpha and MagnaChip Semiconductor

-0.02

Correlation Coefficient

Alpha  MagnaChip Semiconductor

Good diversification

The 3 months correlation between Alpha and MagnaChip is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Alpha and Omega and MagnaChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and Alpha 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 Alpha and Omega are associated (or correlated) with MagnaChip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MagnaChip Semiconductor has no effect on the direction of Alpha i.e., Alpha and MagnaChip Semiconductor go up and down completely randomly.

Pair Corralation between Alpha and MagnaChip Semiconductor

Given the investment horizon of 90 days Alpha and Omega is expected to under-perform the MagnaChip Semiconductor. In addition to that, Alpha is 1.61 times more volatile than MagnaChip Semiconductor. It trades about -0.08 of its total potential returns per unit of risk. MagnaChip Semiconductor is currently generating about 0.1 per unit of volatility. If you would invest  432.00  in MagnaChip Semiconductor on November 28, 2024 and sell it today you would earn a total of  70.00  from holding MagnaChip Semiconductor or generate 16.2% return on investment over 90 days.

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

Alpha and Omega  vs.  MagnaChip Semiconductor

Alpha and Omega

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha and Omega has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

MagnaChip Semiconductor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MagnaChip Semiconductor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, MagnaChip Semiconductor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alpha and MagnaChip Semiconductor

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

The idea behind Alpha and Omega and MagnaChip Semiconductor 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 Stocks Directory module to find actively traded stocks across global markets.