Correlation Between MagnaChip Semiconductor and Kingdee International

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

Diversification Opportunities for MagnaChip Semiconductor and Kingdee International

0.05

Correlation Coefficient

MagnaChip Semiconductor  Kingdee International

Significant diversification

The 3 months correlation between MagnaChip and Kingdee is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor Corp and Kingdee International Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingdee International 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 Kingdee International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingdee International has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and Kingdee International go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and Kingdee International

Assuming the 90 days trading horizon MagnaChip Semiconductor Corp is expected to generate 1.3 times more return on investment than Kingdee International. However, MagnaChip Semiconductor is 1.3 times more volatile than Kingdee International Software. It trades about -0.01 of its potential returns per unit of risk. Kingdee International Software is currently generating about -0.61 per unit of risk. If you would invest  412.00  in MagnaChip Semiconductor Corp on October 8, 2024 and sell it today you would lose (6.00) from holding MagnaChip Semiconductor Corp or give up 1.46% of portfolio value over 90 days.

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

MagnaChip Semiconductor Corp  vs.  Kingdee International Software

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

Kingdee International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingdee International Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Kingdee International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MagnaChip Semiconductor and Kingdee International

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

The idea behind MagnaChip Semiconductor Corp and Kingdee International Software 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.