Correlation Between MagnaChip Semiconductor and Cirrus Logic

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

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

Diversification Opportunities for MagnaChip Semiconductor and Cirrus Logic

0.73

Correlation Coefficient

MagnaChip Semiconductor  Cirrus Logic

Poor diversification

The 3 months correlation between MagnaChip and Cirrus is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and Cirrus Logic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cirrus Logic 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 Cirrus Logic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cirrus Logic has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and Cirrus Logic go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and Cirrus Logic

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to under-perform the Cirrus Logic. In addition to that, MagnaChip Semiconductor is 1.36 times more volatile than Cirrus Logic. It trades about -0.02 of its total potential returns per unit of risk. Cirrus Logic is currently generating about 0.03 per unit of volatility. If you would invest  10,019  in Cirrus Logic on December 29, 2024 and sell it today you would earn a total of  307.00  from holding Cirrus Logic or generate 3.06% return on investment over 90 days.

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

MagnaChip Semiconductor  vs.  Cirrus Logic

MagnaChip Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days MagnaChip Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, MagnaChip Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cirrus Logic

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cirrus Logic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cirrus Logic 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 MagnaChip Semiconductor and Cirrus Logic

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

The idea behind MagnaChip Semiconductor and Cirrus Logic 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.