Correlation Between Magnachip Semiconductor and WATER WAYS

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

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

Diversification Opportunities for Magnachip Semiconductor and WATER WAYS

0.1

Correlation Coefficient

Magnachip Semiconductor  WATER WAYS

Average diversification

The 3 months correlation between Magnachip and WATER is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Magnachip Semiconductor and WATER WAYS TECHS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WATER WAYS TECHS 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 WATER WAYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WATER WAYS TECHS has no effect on the direction of Magnachip Semiconductor i.e., Magnachip Semiconductor and WATER WAYS go up and down completely randomly.

Pair Corralation between Magnachip Semiconductor and WATER WAYS

Assuming the 90 days horizon Magnachip Semiconductor is expected to under-perform the WATER WAYS. But the stock apears to be less risky and, when comparing its historical volatility, Magnachip Semiconductor is 11.45 times less risky than WATER WAYS. The stock trades about -0.06 of its potential returns per unit of risk. The WATER WAYS TECHS is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  187.00  in WATER WAYS TECHS on October 4, 2024 and sell it today you would lose (186.85) from holding WATER WAYS TECHS or give up 99.92% 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.  WATER WAYS TECHS

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.

WATER WAYS TECHS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WATER WAYS TECHS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, WATER WAYS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnachip Semiconductor and WATER WAYS

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

The idea behind Magnachip Semiconductor and WATER WAYS TECHS 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.