Correlation Between MagnaChip Semiconductor and Globalfoundries

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

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

Diversification Opportunities for MagnaChip Semiconductor and Globalfoundries

-0.45

Correlation Coefficient

MagnaChip Semiconductor  Globalfoundries

Very good diversification

The 3 months correlation between MagnaChip and Globalfoundries is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and Globalfoundries go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and Globalfoundries

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to under-perform the Globalfoundries. But the stock apears to be less risky and, when comparing its historical volatility, MagnaChip Semiconductor is 1.13 times less risky than Globalfoundries. The stock trades about -0.13 of its potential returns per unit of risk. The Globalfoundries is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,837  in Globalfoundries on September 23, 2024 and sell it today you would earn a total of  335.00  from holding Globalfoundries or generate 8.73% return on investment over 90 days.

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

MagnaChip Semiconductor  vs.  Globalfoundries

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.

Globalfoundries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Globalfoundries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MagnaChip Semiconductor and Globalfoundries

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

The idea behind MagnaChip Semiconductor and Globalfoundries 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.