Correlation Between MagnaChip Semiconductor and Meli Hotels

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

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

Diversification Opportunities for MagnaChip Semiconductor and Meli Hotels

-0.39

Correlation Coefficient

MagnaChip Semiconductor  Meli Hotels

Very good diversification

The 3 months correlation between MagnaChip and Meli is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and Meli Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meli Hotels International 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 Meli Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meli Hotels International has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and Meli Hotels go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and Meli Hotels

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to under-perform the Meli Hotels. In addition to that, MagnaChip Semiconductor is 1.24 times more volatile than Meli Hotels International. It trades about -0.06 of its total potential returns per unit of risk. Meli Hotels International is currently generating about 0.03 per unit of volatility. If you would invest  645.00  in Meli Hotels International on October 5, 2024 and sell it today you would earn a total of  134.00  from holding Meli Hotels International or generate 20.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.58%
Values	Daily Returns

MagnaChip Semiconductor  vs.  Meli Hotels International

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Meli Hotels International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meli Hotels International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Meli Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MagnaChip Semiconductor and Meli Hotels

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

The idea behind MagnaChip Semiconductor and Meli Hotels International 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.