Correlation Between MagnaChip Semiconductor and GENERAL

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

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

Diversification Opportunities for MagnaChip Semiconductor and GENERAL

-0.69

Correlation Coefficient

MagnaChip Semiconductor  GENERAL

Excellent diversification

The 3 months correlation between MagnaChip and GENERAL is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and GENERAL go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and GENERAL

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to under-perform the GENERAL. In addition to that, MagnaChip Semiconductor is 1.4 times more volatile than GENERAL ELEC CAP. It trades about -0.07 of its total potential returns per unit of risk. GENERAL ELEC CAP is currently generating about 0.01 per unit of volatility. If you would invest  9,261  in GENERAL ELEC CAP on October 11, 2024 and sell it today you would earn a total of  124.00  from holding GENERAL ELEC CAP or generate 1.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	41.94%
Values	Daily Returns

MagnaChip Semiconductor  vs.  GENERAL ELEC CAP

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GENERAL 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 GENERAL

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

The idea behind MagnaChip Semiconductor and GENERAL ELEC CAP 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.