Correlation Between MagnaChip Semiconductor and Trio Tech

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

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

Diversification Opportunities for MagnaChip Semiconductor and Trio Tech

0.1

Correlation Coefficient

MagnaChip Semiconductor  Trio Tech

Average diversification

The 3 months correlation between MagnaChip and Trio is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and Trio Tech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trio Tech 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 Trio Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trio Tech International has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and Trio Tech go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and Trio Tech

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to generate 1.38 times more return on investment than Trio Tech. However, MagnaChip Semiconductor is 1.38 times more volatile than Trio Tech International. It trades about 0.0 of its potential returns per unit of risk. Trio Tech International is currently generating about -0.24 per unit of risk. If you would invest  426.00  in MagnaChip Semiconductor on October 6, 2024 and sell it today you would lose (4.00) from holding MagnaChip Semiconductor or give up 0.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

MagnaChip Semiconductor  vs.  Trio Tech 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.

Trio Tech International

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Trio Tech International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Trio Tech is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MagnaChip Semiconductor and Trio Tech

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

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