Correlation Between Magnachip Semiconductor and COSTAR GROUP

Can any of the company-specific risk be diversified away by investing in both Magnachip Semiconductor and COSTAR 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 COSTAR 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 COSTAR GROUP INC, you can compare the effects of market volatilities on Magnachip Semiconductor and COSTAR 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 COSTAR GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnachip Semiconductor and COSTAR GROUP.

Diversification Opportunities for Magnachip Semiconductor and COSTAR GROUP

0.13

Correlation Coefficient

Magnachip Semiconductor  COSTAR GROUP

Average diversification

The 3 months correlation between Magnachip and COSTAR is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Magnachip Semiconductor and COSTAR GROUP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSTAR GROUP INC 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 COSTAR GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSTAR GROUP INC has no effect on the direction of Magnachip Semiconductor i.e., Magnachip Semiconductor and COSTAR GROUP go up and down completely randomly.

Pair Corralation between Magnachip Semiconductor and COSTAR GROUP

Assuming the 90 days horizon Magnachip Semiconductor is expected to under-perform the COSTAR GROUP. In addition to that, Magnachip Semiconductor is 1.28 times more volatile than COSTAR GROUP INC. It trades about -0.06 of its total potential returns per unit of risk. COSTAR GROUP INC is currently generating about 0.01 per unit of volatility. If you would invest  6,991  in COSTAR GROUP INC on October 11, 2024 and sell it today you would lose (36.00) from holding COSTAR GROUP INC or give up 0.51% 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.  COSTAR GROUP INC

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 fragile 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.

COSTAR GROUP INC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COSTAR GROUP INC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, COSTAR GROUP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Magnachip Semiconductor and COSTAR GROUP

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

The idea behind Magnachip Semiconductor and COSTAR GROUP INC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.