Correlation Between Magnachip Semiconductor and FORWARD AIR

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

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

Diversification Opportunities for Magnachip Semiconductor and FORWARD AIR

0.16

Correlation Coefficient

Magnachip Semiconductor  FORWARD AIR

Average diversification

The 3 months correlation between Magnachip and FORWARD is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Magnachip Semiconductor and FORWARD AIR P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORWARD AIR P 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 FORWARD AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORWARD AIR P has no effect on the direction of Magnachip Semiconductor i.e., Magnachip Semiconductor and FORWARD AIR go up and down completely randomly.

Pair Corralation between Magnachip Semiconductor and FORWARD AIR

Assuming the 90 days horizon Magnachip Semiconductor is expected to generate 2.36 times less return on investment than FORWARD AIR. But when comparing it to its historical volatility, Magnachip Semiconductor is 1.43 times less risky than FORWARD AIR. It trades about 0.04 of its potential returns per unit of risk. FORWARD AIR P is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,980  in FORWARD AIR P on September 5, 2024 and sell it today you would earn a total of  420.00  from holding FORWARD AIR P or generate 14.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Magnachip Semiconductor  vs.  FORWARD AIR P

Magnachip Semiconductor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magnachip Semiconductor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Magnachip Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FORWARD AIR P

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FORWARD AIR P are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FORWARD AIR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnachip Semiconductor and FORWARD AIR

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

The idea behind Magnachip Semiconductor and FORWARD AIR P 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.