Correlation Between Magnachip Semiconductor and AVITA Medical

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

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

Diversification Opportunities for Magnachip Semiconductor and AVITA Medical

-0.45

Correlation Coefficient

Magnachip Semiconductor  AVITA Medical

Very good diversification

The 3 months correlation between Magnachip and AVITA is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Magnachip Semiconductor and AVITA Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVITA Medical 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 AVITA Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVITA Medical has no effect on the direction of Magnachip Semiconductor i.e., Magnachip Semiconductor and AVITA Medical go up and down completely randomly.

Pair Corralation between Magnachip Semiconductor and AVITA Medical

Assuming the 90 days horizon Magnachip Semiconductor is expected to under-perform the AVITA Medical. But the stock apears to be less risky and, when comparing its historical volatility, Magnachip Semiconductor is 1.08 times less risky than AVITA Medical. The stock trades about 0.0 of its potential returns per unit of risk. The AVITA Medical is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  185.00  in AVITA Medical on September 16, 2024 and sell it today you would earn a total of  53.00  from holding AVITA Medical or generate 28.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Magnachip Semiconductor  vs.  AVITA Medical

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. Despite nearly stable basic indicators, Magnachip Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AVITA Medical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AVITA Medical are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, AVITA Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnachip Semiconductor and AVITA Medical

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

The idea behind Magnachip Semiconductor and AVITA Medical 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.