Correlation Between Magnachip Semiconductor and KBC Group

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

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

Diversification Opportunities for Magnachip Semiconductor and KBC Group

-0.11

Correlation Coefficient

Magnachip Semiconductor  KBC Group

Good diversification

The 3 months correlation between Magnachip and KBC is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Magnachip Semiconductor and KBC Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBC Group NV 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 KBC Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBC Group NV has no effect on the direction of Magnachip Semiconductor i.e., Magnachip Semiconductor and KBC Group go up and down completely randomly.

Pair Corralation between Magnachip Semiconductor and KBC Group

Assuming the 90 days horizon Magnachip Semiconductor is expected to under-perform the KBC Group. In addition to that, Magnachip Semiconductor is 1.75 times more volatile than KBC Group NV. It trades about -0.06 of its total potential returns per unit of risk. KBC Group NV is currently generating about 0.04 per unit of volatility. If you would invest  5,817  in KBC Group NV on October 21, 2024 and sell it today you would earn a total of  1,515  from holding KBC Group NV or generate 26.04% return on investment over 90 days.

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

Magnachip Semiconductor  vs.  KBC Group NV

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.

KBC Group NV

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KBC Group NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KBC Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Magnachip Semiconductor and KBC Group

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

The idea behind Magnachip Semiconductor and KBC Group NV 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.