Correlation Between Magnachip Semiconductor and Willis Towers

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

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

Diversification Opportunities for Magnachip Semiconductor and Willis Towers

-0.47

Correlation Coefficient

Magnachip Semiconductor  Willis Towers

Very good diversification

The 3 months correlation between Magnachip and Willis is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Magnachip Semiconductor and Willis Towers Watson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willis Towers Watson 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 Willis Towers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willis Towers Watson has no effect on the direction of Magnachip Semiconductor i.e., Magnachip Semiconductor and Willis Towers go up and down completely randomly.

Pair Corralation between Magnachip Semiconductor and Willis Towers

Assuming the 90 days horizon Magnachip Semiconductor is expected to under-perform the Willis Towers. In addition to that, Magnachip Semiconductor is 1.76 times more volatile than Willis Towers Watson. It trades about -0.06 of its total potential returns per unit of risk. Willis Towers Watson is currently generating about 0.05 per unit of volatility. If you would invest  22,134  in Willis Towers Watson on October 11, 2024 and sell it today you would earn a total of  7,666  from holding Willis Towers Watson or generate 34.63% return on investment over 90 days.

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

Magnachip Semiconductor  vs.  Willis Towers Watson

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.

Willis Towers Watson

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Towers Watson are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Willis Towers may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Magnachip Semiconductor and Willis Towers

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

The idea behind Magnachip Semiconductor and Willis Towers Watson 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.