Correlation Between MagnaChip Semiconductor and AVANGRID

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

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

Diversification Opportunities for MagnaChip Semiconductor and AVANGRID

0.09

Correlation Coefficient

MagnaChip Semiconductor  AVANGRID

Significant diversification

The 3 months correlation between MagnaChip and AVANGRID is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and AVANGRID INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVANGRID INC 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 AVANGRID. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVANGRID INC has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and AVANGRID go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and AVANGRID

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to generate 27.76 times more return on investment than AVANGRID. However, MagnaChip Semiconductor is 27.76 times more volatile than AVANGRID INC. It trades about 0.13 of its potential returns per unit of risk. AVANGRID INC is currently generating about 0.04 per unit of risk. If you would invest  364.00  in MagnaChip Semiconductor on November 20, 2024 and sell it today you would earn a total of  87.00  from holding MagnaChip Semiconductor or generate 23.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.14%
Values	Daily Returns

MagnaChip Semiconductor  vs.  AVANGRID INC

MagnaChip Semiconductor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MagnaChip Semiconductor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, MagnaChip Semiconductor showed solid returns over the last few months and may actually be approaching a breakup point.

AVANGRID INC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AVANGRID INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AVANGRID is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MagnaChip Semiconductor and AVANGRID

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

The idea behind MagnaChip Semiconductor and AVANGRID INC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.