Correlation Between MagnaChip Semiconductor and Reinsurance Group

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

Diversification Opportunities for MagnaChip Semiconductor and Reinsurance Group

-0.39

Correlation Coefficient

MagnaChip Semiconductor  Reinsurance Group

Very good diversification

The 3 months correlation between MagnaChip and Reinsurance is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor Corp and Reinsurance Group of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reinsurance Group 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 Reinsurance Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reinsurance Group has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and Reinsurance Group go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and Reinsurance Group

Assuming the 90 days trading horizon MagnaChip Semiconductor Corp is expected to under-perform the Reinsurance Group. In addition to that, MagnaChip Semiconductor is 1.51 times more volatile than Reinsurance Group of. It trades about -0.02 of its total potential returns per unit of risk. Reinsurance Group of is currently generating about 0.02 per unit of volatility. If you would invest  19,913  in Reinsurance Group of on October 5, 2024 and sell it today you would earn a total of  287.00  from holding Reinsurance Group of or generate 1.44% return on investment over 90 days.

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

MagnaChip Semiconductor Corp  vs.  Reinsurance Group of

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.

Reinsurance Group

Risk-Adjusted Performance

0 of 100

Insignificant

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

Pair Trading with MagnaChip Semiconductor and Reinsurance Group

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

The idea behind MagnaChip Semiconductor Corp and Reinsurance Group of 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..