Correlation Between MagnaChip Semiconductor and Microchip Technology

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

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

Diversification Opportunities for MagnaChip Semiconductor and Microchip Technology

-0.06

Correlation Coefficient

MagnaChip Semiconductor  Microchip Technology

Good diversification

The 3 months correlation between MagnaChip and Microchip is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology 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 Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and Microchip Technology go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and Microchip Technology

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to generate 1.13 times more return on investment than Microchip Technology. However, MagnaChip Semiconductor is 1.13 times more volatile than Microchip Technology. It trades about 0.03 of its potential returns per unit of risk. Microchip Technology is currently generating about -0.09 per unit of risk. If you would invest  447.00  in MagnaChip Semiconductor on December 1, 2024 and sell it today you would earn a total of  16.00  from holding MagnaChip Semiconductor or generate 3.58% 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.  Microchip Technology

MagnaChip Semiconductor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MagnaChip Semiconductor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, MagnaChip Semiconductor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Microchip Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microchip Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 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 Microchip Technology

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

The idea behind MagnaChip Semiconductor and Microchip Technology 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 Global Correlations module to find global opportunities by holding instruments from different markets.