Correlation Between Computer and Magnachip Semiconductor

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

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

Diversification Opportunities for Computer and Magnachip Semiconductor

0.47

Correlation Coefficient

Computer  Magnachip Semiconductor

Very weak diversification

The 3 months correlation between Computer and Magnachip is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Computer And Technologies and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and Computer 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 Computer And Technologies 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 Computer i.e., Computer and Magnachip Semiconductor go up and down completely randomly.

Pair Corralation between Computer and Magnachip Semiconductor

Assuming the 90 days horizon Computer And Technologies is expected to generate 1.13 times more return on investment than Magnachip Semiconductor. However, Computer is 1.13 times more volatile than Magnachip Semiconductor. It trades about 0.06 of its potential returns per unit of risk. Magnachip Semiconductor is currently generating about 0.03 per unit of risk. If you would invest  19.00  in Computer And Technologies on December 2, 2024 and sell it today you would earn a total of  2.00  from holding Computer And Technologies or generate 10.53% return on investment over 90 days.

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

Computer And Technologies  vs.  Magnachip Semiconductor

Computer And Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Computer And Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Computer reported solid returns over the last few months and may actually be approaching a breakup point.

Magnachip Semiconductor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Magnachip Semiconductor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Magnachip Semiconductor is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Computer and Magnachip Semiconductor

The main advantage of trading using opposite Computer and Magnachip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Computer 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 Computer And Technologies 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.