Correlation Between GSI Technology and MagnaChip Semiconductor

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

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

Diversification Opportunities for GSI Technology and MagnaChip Semiconductor

0.42

Correlation Coefficient

GSI Technology  MagnaChip Semiconductor

Very weak diversification

The 3 months correlation between GSI and MagnaChip is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding GSI Technology and MagnaChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and GSI Technology 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 GSI Technology 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 GSI Technology i.e., GSI Technology and MagnaChip Semiconductor go up and down completely randomly.

Pair Corralation between GSI Technology and MagnaChip Semiconductor

Given the investment horizon of 90 days GSI Technology is expected to generate 4.09 times less return on investment than MagnaChip Semiconductor. In addition to that, GSI Technology is 1.12 times more volatile than MagnaChip Semiconductor. It trades about 0.07 of its total potential returns per unit of risk. MagnaChip Semiconductor is currently generating about 0.33 per unit of volatility. If you would invest  402.00  in MagnaChip Semiconductor on November 28, 2024 and sell it today you would earn a total of  100.00  from holding MagnaChip Semiconductor or generate 24.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

GSI Technology  vs.  MagnaChip Semiconductor

GSI Technology

Risk-Adjusted Performance

Very Weak

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

MagnaChip Semiconductor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MagnaChip Semiconductor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, MagnaChip Semiconductor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GSI Technology and MagnaChip Semiconductor

The main advantage of trading using opposite GSI Technology and MagnaChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSI Technology 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 GSI Technology 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.