Correlation Between MagnaChip Semiconductor and CVD Equipment

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

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

Diversification Opportunities for MagnaChip Semiconductor and CVD Equipment

-0.1

Correlation Coefficient

MagnaChip Semiconductor  CVD Equipment

Good diversification

The 3 months correlation between MagnaChip and CVD is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and CVD Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVD Equipment 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 CVD Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVD Equipment has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and CVD Equipment go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and CVD Equipment

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to generate 9.87 times less return on investment than CVD Equipment. But when comparing it to its historical volatility, MagnaChip Semiconductor is 1.88 times less risky than CVD Equipment. It trades about 0.04 of its potential returns per unit of risk. CVD Equipment is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  290.00  in CVD Equipment on October 6, 2024 and sell it today you would earn a total of  162.00  from holding CVD Equipment or generate 55.86% return on investment over 90 days.

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

MagnaChip Semiconductor  vs.  CVD Equipment

MagnaChip Semiconductor

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CVD Equipment

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with MagnaChip Semiconductor and CVD Equipment

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

The idea behind MagnaChip Semiconductor and CVD Equipment 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.