Correlation Between MagnaChip Semiconductor and ALD SA

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

By analyzing existing cross correlation between MagnaChip Semiconductor Corp and ALD SA, you can compare the effects of market volatilities on MagnaChip Semiconductor and ALD SA 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 ALD SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MagnaChip Semiconductor and ALD SA.

Diversification Opportunities for MagnaChip Semiconductor and ALD SA

-0.4

Correlation Coefficient

MagnaChip Semiconductor  ALD SA

Very good diversification

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

Pair Corralation between MagnaChip Semiconductor and ALD SA

Assuming the 90 days trading horizon MagnaChip Semiconductor Corp is expected to under-perform the ALD SA. But the stock apears to be less risky and, when comparing its historical volatility, MagnaChip Semiconductor Corp is 1.11 times less risky than ALD SA. The stock trades about -0.06 of its potential returns per unit of risk. The ALD SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  952.00  in ALD SA on October 4, 2024 and sell it today you would lose (326.00) from holding ALD SA or give up 34.24% 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 Corp  vs.  ALD SA

MagnaChip Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MagnaChip Semiconductor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, MagnaChip Semiconductor is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

ALD SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ALD SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ALD SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MagnaChip Semiconductor and ALD SA

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

The idea behind MagnaChip Semiconductor Corp and ALD SA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.