Correlation Between Magnachip Semiconductor and Electronic Arts

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Can any of the company-specific risk be diversified away by investing in both Magnachip Semiconductor and Electronic Arts 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 Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magnachip Semiconductor and Electronic Arts, you can compare the effects of market volatilities on Magnachip Semiconductor and Electronic Arts 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 Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnachip Semiconductor and Electronic Arts.

Diversification Opportunities for Magnachip Semiconductor and Electronic Arts

-0.3
  Correlation Coefficient

Very good diversification

The 3 months correlation between Magnachip and Electronic is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Magnachip Semiconductor and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts 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 Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of Magnachip Semiconductor i.e., Magnachip Semiconductor and Electronic Arts go up and down completely randomly.

Pair Corralation between Magnachip Semiconductor and Electronic Arts

Assuming the 90 days horizon Magnachip Semiconductor is expected to generate 1.27 times more return on investment than Electronic Arts. However, Magnachip Semiconductor is 1.27 times more volatile than Electronic Arts. It trades about -0.02 of its potential returns per unit of risk. Electronic Arts is currently generating about -0.09 per unit of risk. If you would invest  422.00  in Magnachip Semiconductor on October 26, 2024 and sell it today you would lose (32.00) from holding Magnachip Semiconductor or give up 7.58% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Magnachip Semiconductor  vs.  Electronic Arts

 Performance 
       Timeline  
Magnachip Semiconductor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Electronic Arts 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Electronic Arts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Magnachip Semiconductor and Electronic Arts Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Magnachip Semiconductor and Electronic Arts

The main advantage of trading using opposite Magnachip Semiconductor and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnachip Semiconductor position performs unexpectedly, Electronic Arts 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 Electronic Arts will offset losses from the drop in Electronic Arts' long position.
The idea behind Magnachip Semiconductor and Electronic Arts 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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