Correlation Between Magnachip Semiconductor and Anhui Expressway

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

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

Diversification Opportunities for Magnachip Semiconductor and Anhui Expressway

0.27

Correlation Coefficient

Magnachip Semiconductor  Anhui Expressway

Modest diversification

The 3 months correlation between Magnachip and Anhui is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Magnachip Semiconductor and Anhui Expressway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Expressway 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 Anhui Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Expressway has no effect on the direction of Magnachip Semiconductor i.e., Magnachip Semiconductor and Anhui Expressway go up and down completely randomly.

Pair Corralation between Magnachip Semiconductor and Anhui Expressway

Assuming the 90 days horizon Magnachip Semiconductor is expected to generate 2.17 times less return on investment than Anhui Expressway. But when comparing it to its historical volatility, Magnachip Semiconductor is 1.01 times less risky than Anhui Expressway. It trades about 0.1 of its potential returns per unit of risk. Anhui Expressway is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  118.00  in Anhui Expressway on October 8, 2024 and sell it today you would earn a total of  10.00  from holding Anhui Expressway or generate 8.47% return on investment over 90 days.

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

Magnachip Semiconductor  vs.  Anhui Expressway

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.

Anhui Expressway

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Expressway are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Anhui Expressway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnachip Semiconductor and Anhui Expressway

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

The idea behind Magnachip Semiconductor and Anhui Expressway 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 Anywhere module to track or share privately all of your investments from the convenience of any device.