Correlation Between Perseus Mining and MagnaChip Semiconductor

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

By analyzing existing cross correlation between Perseus Mining Limited and MagnaChip Semiconductor, you can compare the effects of market volatilities on Perseus Mining and MagnaChip Semiconductor 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 Perseus Mining with a short position of MagnaChip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perseus Mining and MagnaChip Semiconductor.

Diversification Opportunities for Perseus Mining and MagnaChip Semiconductor

0.67

Correlation Coefficient

Perseus Mining  MagnaChip Semiconductor

Poor diversification

The 3 months correlation between Perseus and MagnaChip is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Perseus Mining Limited and MagnaChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and Perseus Mining 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 Perseus Mining Limited are associated (or correlated) with MagnaChip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MagnaChip Semiconductor has no effect on the direction of Perseus Mining i.e., Perseus Mining and MagnaChip Semiconductor go up and down completely randomly.

Pair Corralation between Perseus Mining and MagnaChip Semiconductor

Assuming the 90 days horizon Perseus Mining is expected to generate 1.91 times less return on investment than MagnaChip Semiconductor. But when comparing it to its historical volatility, Perseus Mining Limited is 1.29 times less risky than MagnaChip Semiconductor. It trades about 0.09 of its potential returns per unit of risk. MagnaChip Semiconductor is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  391.00  in MagnaChip Semiconductor on October 22, 2024 and sell it today you would earn a total of  25.00  from holding MagnaChip Semiconductor or generate 6.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Perseus Mining Limited  vs.  MagnaChip Semiconductor

Perseus Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perseus Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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.

Pair Trading with Perseus Mining and MagnaChip Semiconductor

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

The idea behind Perseus Mining Limited and MagnaChip Semiconductor 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.