Correlation Between MagnaChip Semiconductor and Otis Worldwide

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

Diversification Opportunities for MagnaChip Semiconductor and Otis Worldwide

0.3

Correlation Coefficient

MagnaChip Semiconductor  Otis Worldwide

Weak diversification

The 3 months correlation between MagnaChip and Otis is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor Corp and Otis Worldwide Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otis Worldwide Corp 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 Otis Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otis Worldwide Corp has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and Otis Worldwide go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and Otis Worldwide

Assuming the 90 days trading horizon MagnaChip Semiconductor Corp is expected to generate 2.31 times more return on investment than Otis Worldwide. However, MagnaChip Semiconductor is 2.31 times more volatile than Otis Worldwide Corp. It trades about 0.14 of its potential returns per unit of risk. Otis Worldwide Corp is currently generating about -0.01 per unit of risk. If you would invest  364.00  in MagnaChip Semiconductor Corp on October 20, 2024 and sell it today you would earn a total of  22.00  from holding MagnaChip Semiconductor Corp or generate 6.04% return on investment over 90 days.

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

MagnaChip Semiconductor Corp  vs.  Otis Worldwide Corp

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Otis Worldwide Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otis Worldwide Corp 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.

Pair Trading with MagnaChip Semiconductor and Otis Worldwide

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

The idea behind MagnaChip Semiconductor Corp and Otis Worldwide Corp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.