Correlation Between Magnachip Semiconductor and RCI Hospitality

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

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

Diversification Opportunities for Magnachip Semiconductor and RCI Hospitality

-0.4

Correlation Coefficient

Magnachip Semiconductor  RCI Hospitality

Very good diversification

The 3 months correlation between Magnachip and RCI is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Magnachip Semiconductor and RCI Hospitality Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCI Hospitality Holdings 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 RCI Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCI Hospitality Holdings has no effect on the direction of Magnachip Semiconductor i.e., Magnachip Semiconductor and RCI Hospitality go up and down completely randomly.

Pair Corralation between Magnachip Semiconductor and RCI Hospitality

Assuming the 90 days horizon Magnachip Semiconductor is expected to under-perform the RCI Hospitality. In addition to that, Magnachip Semiconductor is 1.05 times more volatile than RCI Hospitality Holdings. It trades about -0.06 of its total potential returns per unit of risk. RCI Hospitality Holdings is currently generating about -0.02 per unit of volatility. If you would invest  8,271  in RCI Hospitality Holdings on October 11, 2024 and sell it today you would lose (2,761) from holding RCI Hospitality Holdings or give up 33.38% of portfolio value over 90 days.

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

Magnachip Semiconductor  vs.  RCI Hospitality Holdings

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 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.

RCI Hospitality Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, RCI Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnachip Semiconductor and RCI Hospitality

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

The idea behind Magnachip Semiconductor and RCI Hospitality Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.