Correlation Between MagnaChip Semiconductor and Credo Technology

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

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

Diversification Opportunities for MagnaChip Semiconductor and Credo Technology

0.48

Correlation Coefficient

MagnaChip Semiconductor  Credo Technology

Very weak diversification

The 3 months correlation between MagnaChip and Credo is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and Credo Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credo Technology and MagnaChip 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 MagnaChip Semiconductor are associated (or correlated) with Credo Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credo Technology has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and Credo Technology go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and Credo Technology

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to generate 2.92 times less return on investment than Credo Technology. But when comparing it to its historical volatility, MagnaChip Semiconductor is 2.86 times less risky than Credo Technology. It trades about 0.13 of its potential returns per unit of risk. Credo Technology Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,297  in Credo Technology Group on November 20, 2024 and sell it today you would earn a total of  2,773  from holding Credo Technology Group or generate 64.53% return on investment over 90 days.

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

MagnaChip Semiconductor  vs.  Credo Technology Group

MagnaChip Semiconductor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MagnaChip Semiconductor are ranked lower than 10 (%) 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.

Credo Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Credo Technology Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Credo Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MagnaChip Semiconductor and Credo Technology

The main advantage of trading using opposite MagnaChip Semiconductor and Credo Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MagnaChip Semiconductor position performs unexpectedly, Credo Technology 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 Credo Technology will offset losses from the drop in Credo Technology's long position.

The idea behind MagnaChip Semiconductor and Credo Technology Group 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.