Correlation Between MagnaChip Semiconductor and SFC Energy

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

Diversification Opportunities for MagnaChip Semiconductor and SFC Energy

0.67

Correlation Coefficient

MagnaChip Semiconductor  SFC Energy

Poor diversification

The 3 months correlation between MagnaChip and SFC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor Corp and SFC Energy AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFC Energy AG 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 SFC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFC Energy AG has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and SFC Energy go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and SFC Energy

Assuming the 90 days trading horizon MagnaChip Semiconductor Corp is expected to generate 1.43 times more return on investment than SFC Energy. However, MagnaChip Semiconductor is 1.43 times more volatile than SFC Energy AG. It trades about -0.02 of its potential returns per unit of risk. SFC Energy AG is currently generating about -0.11 per unit of risk. If you would invest  412.00  in MagnaChip Semiconductor Corp on September 14, 2024 and sell it today you would lose (30.00) from holding MagnaChip Semiconductor Corp or give up 7.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

MagnaChip Semiconductor Corp  vs.  SFC Energy AG

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

SFC Energy AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SFC Energy AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with MagnaChip Semiconductor and SFC Energy

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

The idea behind MagnaChip Semiconductor Corp and SFC Energy AG 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.