Correlation Between Magnachip Semiconductor and Halliburton

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

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

Diversification Opportunities for Magnachip Semiconductor and Halliburton

0.16

Correlation Coefficient

Magnachip Semiconductor  Halliburton

Average diversification

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

Pair Corralation between Magnachip Semiconductor and Halliburton

Assuming the 90 days horizon Magnachip Semiconductor is expected to under-perform the Halliburton. In addition to that, Magnachip Semiconductor is 1.65 times more volatile than Halliburton. It trades about -0.05 of its total potential returns per unit of risk. Halliburton is currently generating about -0.08 per unit of volatility. If you would invest  2,560  in Halliburton on December 24, 2024 and sell it today you would lose (259.00) from holding Halliburton or give up 10.12% of portfolio value over 90 days.

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

Magnachip Semiconductor  vs.  Halliburton

Magnachip Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magnachip Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Halliburton

Risk-Adjusted Performance

Very Weak

Over the last 90 days Halliburton has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Magnachip Semiconductor and Halliburton

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

The idea behind Magnachip Semiconductor and Halliburton 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .