Correlation Between Keurig Dr and Magnachip Semiconductor

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

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

Diversification Opportunities for Keurig Dr and Magnachip Semiconductor

0.63

Correlation Coefficient

Keurig Dr  Magnachip Semiconductor

Poor diversification

The 3 months correlation between Keurig and Magnachip is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and Keurig Dr 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 Keurig Dr Pepper 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 Keurig Dr i.e., Keurig Dr and Magnachip Semiconductor go up and down completely randomly.

Pair Corralation between Keurig Dr and Magnachip Semiconductor

Assuming the 90 days horizon Keurig Dr Pepper is expected to under-perform the Magnachip Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Keurig Dr Pepper is 2.24 times less risky than Magnachip Semiconductor. The stock trades about -0.02 of its potential returns per unit of risk. The Magnachip Semiconductor is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  394.00  in Magnachip Semiconductor on September 14, 2024 and sell it today you would lose (6.00) from holding Magnachip Semiconductor or give up 1.52% of portfolio value over 90 days.

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

Keurig Dr Pepper  vs.  Magnachip Semiconductor

Keurig Dr Pepper

Risk-Adjusted Performance

0 of 100

Very Weak

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

Magnachip Semiconductor

Risk-Adjusted Performance

0 of 100

Very 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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Keurig Dr and Magnachip Semiconductor

The main advantage of trading using opposite Keurig Dr and Magnachip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keurig Dr 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 Keurig Dr Pepper 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 Global Correlations module to find global opportunities by holding instruments from different markets.