Correlation Between ELMOS SEMICONDUCTOR and MagnaChip Semiconductor

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

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

Diversification Opportunities for ELMOS SEMICONDUCTOR and MagnaChip Semiconductor

0.18

Correlation Coefficient

ELMOS SEMICONDUCTOR  MagnaChip Semiconductor

Average diversification

The 3 months correlation between ELMOS and MagnaChip is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding ELMOS SEMICONDUCTOR and MagnaChip Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR i.e., ELMOS SEMICONDUCTOR and MagnaChip Semiconductor go up and down completely randomly.

Pair Corralation between ELMOS SEMICONDUCTOR and MagnaChip Semiconductor

Assuming the 90 days trading horizon ELMOS SEMICONDUCTOR is expected to generate 1.04 times more return on investment than MagnaChip Semiconductor. However, ELMOS SEMICONDUCTOR is 1.04 times more volatile than MagnaChip Semiconductor Corp. It trades about 0.02 of its potential returns per unit of risk. MagnaChip Semiconductor Corp is currently generating about -0.03 per unit of risk. If you would invest  6,630  in ELMOS SEMICONDUCTOR on September 15, 2024 and sell it today you would earn a total of  110.00  from holding ELMOS SEMICONDUCTOR or generate 1.66% return on investment over 90 days.

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

ELMOS SEMICONDUCTOR  vs.  MagnaChip Semiconductor Corp

ELMOS SEMICONDUCTOR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ELMOS SEMICONDUCTOR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, ELMOS SEMICONDUCTOR is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

MagnaChip Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MagnaChip Semiconductor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, MagnaChip Semiconductor is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ELMOS SEMICONDUCTOR and MagnaChip Semiconductor

The main advantage of trading using opposite ELMOS SEMICONDUCTOR and MagnaChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR and MagnaChip Semiconductor Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.