Correlation Between Magnachip Semiconductor and MTI WIRELESS

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

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

Diversification Opportunities for Magnachip Semiconductor and MTI WIRELESS

0.12

Correlation Coefficient

Magnachip Semiconductor  MTI WIRELESS

Average diversification

The 3 months correlation between Magnachip and MTI is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Magnachip Semiconductor and MTI WIRELESS EDGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTI WIRELESS EDGE 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 MTI WIRELESS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTI WIRELESS EDGE has no effect on the direction of Magnachip Semiconductor i.e., Magnachip Semiconductor and MTI WIRELESS go up and down completely randomly.

Pair Corralation between Magnachip Semiconductor and MTI WIRELESS

Assuming the 90 days horizon Magnachip Semiconductor is expected to generate 1.53 times more return on investment than MTI WIRELESS. However, Magnachip Semiconductor is 1.53 times more volatile than MTI WIRELESS EDGE. It trades about 0.2 of its potential returns per unit of risk. MTI WIRELESS EDGE is currently generating about -0.21 per unit of risk. If you would invest  336.00  in Magnachip Semiconductor on September 12, 2024 and sell it today you would earn a total of  50.00  from holding Magnachip Semiconductor or generate 14.88% 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.  MTI WIRELESS EDGE

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

MTI WIRELESS EDGE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTI WIRELESS EDGE 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.

Pair Trading with Magnachip Semiconductor and MTI WIRELESS

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

The idea behind Magnachip Semiconductor and MTI WIRELESS EDGE 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.