Correlation Between MagnaChip Semiconductor and Hafnia

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

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

Diversification Opportunities for MagnaChip Semiconductor and Hafnia

-0.08

Correlation Coefficient

MagnaChip Semiconductor  Hafnia

Good diversification

The 3 months correlation between MagnaChip and Hafnia is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and Hafnia go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and Hafnia

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to generate 0.99 times more return on investment than Hafnia. However, MagnaChip Semiconductor is 1.01 times less risky than Hafnia. It trades about 0.02 of its potential returns per unit of risk. Hafnia Limited is currently generating about -0.06 per unit of risk. If you would invest  391.00  in MagnaChip Semiconductor on December 21, 2024 and sell it today you would earn a total of  2.00  from holding MagnaChip Semiconductor or generate 0.51% 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.  Hafnia Limited

MagnaChip Semiconductor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MagnaChip Semiconductor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Hafnia Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with MagnaChip Semiconductor and Hafnia

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

The idea behind MagnaChip Semiconductor and Hafnia Limited 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.