Correlation Between MagnaChip Semiconductor and First Solar

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

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

Diversification Opportunities for MagnaChip Semiconductor and First Solar

0.61

Correlation Coefficient

MagnaChip Semiconductor  First Solar

Poor diversification

The 3 months correlation between MagnaChip and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar 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 First Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Solar has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and First Solar go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and First Solar

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to generate 0.9 times more return on investment than First Solar. However, MagnaChip Semiconductor is 1.11 times less risky than First Solar. It trades about -0.08 of its potential returns per unit of risk. First Solar is currently generating about -0.13 per unit of risk. If you would invest  462.00  in MagnaChip Semiconductor on September 23, 2024 and sell it today you would lose (75.00) from holding MagnaChip Semiconductor or give up 16.23% of portfolio value over 90 days.

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

MagnaChip Semiconductor  vs.  First Solar

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

First Solar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Solar has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with MagnaChip Semiconductor and First Solar

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

The idea behind MagnaChip Semiconductor and First Solar 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.