Correlation Between MagnaChip Semiconductor and SPI Energy

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

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

Diversification Opportunities for MagnaChip Semiconductor and SPI Energy

-0.37

Correlation Coefficient

MagnaChip Semiconductor  SPI Energy

Very good diversification

The 3 months correlation between MagnaChip and SPI is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and SPI Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPI Energy 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 SPI Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPI Energy has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and SPI Energy go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and SPI Energy

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to generate 58.96 times less return on investment than SPI Energy. But when comparing it to its historical volatility, MagnaChip Semiconductor is 6.91 times less risky than SPI Energy. It trades about 0.01 of its potential returns per unit of risk. SPI Energy Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  38.00  in SPI Energy Co on December 24, 2024 and sell it today you would lose (2.00) from holding SPI Energy Co or give up 5.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	24.59%
Values	Daily Returns

MagnaChip Semiconductor  vs.  SPI Energy Co

MagnaChip Semiconductor

Risk-Adjusted Performance

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 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.

SPI Energy

Risk-Adjusted Performance

OK

Over the last 90 days SPI Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unfluctuating basic indicators, SPI Energy demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MagnaChip Semiconductor and SPI Energy

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

The idea behind MagnaChip Semiconductor and SPI Energy Co 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.