Correlation Between MagnaChip Semiconductor and ChipMOS Technologies

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

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

Diversification Opportunities for MagnaChip Semiconductor and ChipMOS Technologies

0.77

Correlation Coefficient

MagnaChip Semiconductor  ChipMOS Technologies

Poor diversification

The 3 months correlation between MagnaChip and ChipMOS is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and ChipMOS Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChipMOS Technologies 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 ChipMOS Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChipMOS Technologies has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and ChipMOS Technologies go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and ChipMOS Technologies

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to generate 1.85 times more return on investment than ChipMOS Technologies. However, MagnaChip Semiconductor is 1.85 times more volatile than ChipMOS Technologies. It trades about 0.02 of its potential returns per unit of risk. ChipMOS Technologies is currently generating about -0.07 per unit of risk. If you would invest  386.00  in MagnaChip Semiconductor on September 23, 2024 and sell it today you would earn a total of  1.00  from holding MagnaChip Semiconductor or generate 0.26% 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.  ChipMOS Technologies

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.

ChipMOS Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChipMOS Technologies 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 comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with MagnaChip Semiconductor and ChipMOS Technologies

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

The idea behind MagnaChip Semiconductor and ChipMOS Technologies 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.