Correlation Between Entravision Communications and Magnachip Semiconductor

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

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

Diversification Opportunities for Entravision Communications and Magnachip Semiconductor

-0.65

Correlation Coefficient

Entravision Communications  Magnachip Semiconductor

Excellent diversification

The 3 months correlation between Entravision and Magnachip is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and Entravision Communications 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 Entravision Communications 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 Entravision Communications i.e., Entravision Communications and Magnachip Semiconductor go up and down completely randomly.

Pair Corralation between Entravision Communications and Magnachip Semiconductor

Assuming the 90 days horizon Entravision Communications is expected to under-perform the Magnachip Semiconductor. In addition to that, Entravision Communications is 1.34 times more volatile than Magnachip Semiconductor. It trades about -0.02 of its total potential returns per unit of risk. Magnachip Semiconductor is currently generating about 0.04 per unit of volatility. If you would invest  416.00  in Magnachip Semiconductor on December 3, 2024 and sell it today you would earn a total of  18.00  from holding Magnachip Semiconductor or generate 4.33% return on investment over 90 days.

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

Entravision Communications  vs.  Magnachip Semiconductor

Entravision Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Entravision Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Entravision Communications 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

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 uncertain basic indicators, Magnachip Semiconductor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Entravision Communications and Magnachip Semiconductor

The main advantage of trading using opposite Entravision Communications and Magnachip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entravision Communications 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 Entravision Communications 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.