Correlation Between DFS Furniture and Magnachip Semiconductor

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

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

Diversification Opportunities for DFS Furniture and Magnachip Semiconductor

0.04

Correlation Coefficient

DFS Furniture  Magnachip Semiconductor

Significant diversification

The 3 months correlation between DFS and Magnachip is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and DFS Furniture 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 DFS Furniture PLC 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 DFS Furniture i.e., DFS Furniture and Magnachip Semiconductor go up and down completely randomly.

Pair Corralation between DFS Furniture and Magnachip Semiconductor

Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 0.65 times more return on investment than Magnachip Semiconductor. However, DFS Furniture PLC is 1.55 times less risky than Magnachip Semiconductor. It trades about 0.17 of its potential returns per unit of risk. Magnachip Semiconductor is currently generating about 0.0 per unit of risk. If you would invest  133.00  in DFS Furniture PLC on September 12, 2024 and sell it today you would earn a total of  33.00  from holding DFS Furniture PLC or generate 24.81% return on investment over 90 days.

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

DFS Furniture PLC  vs.  Magnachip Semiconductor

DFS Furniture PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DFS Furniture unveiled solid returns over the last few months and may actually be approaching a breakup point.

Magnachip Semiconductor

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Magnachip Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Magnachip Semiconductor is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DFS Furniture and Magnachip Semiconductor

The main advantage of trading using opposite DFS Furniture and Magnachip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture 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 DFS Furniture PLC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.