Correlation Between MagnaChip Semiconductor and Toll Brothers

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

Diversification Opportunities for MagnaChip Semiconductor and Toll Brothers

0.12

Correlation Coefficient

MagnaChip Semiconductor  Toll Brothers

Average diversification

The 3 months correlation between MagnaChip and Toll is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor Corp and Toll Brothers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toll Brothers 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 Toll Brothers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toll Brothers has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and Toll Brothers go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and Toll Brothers

Assuming the 90 days trading horizon MagnaChip Semiconductor Corp is expected to generate 1.4 times more return on investment than Toll Brothers. However, MagnaChip Semiconductor is 1.4 times more volatile than Toll Brothers. It trades about 0.01 of its potential returns per unit of risk. Toll Brothers is currently generating about -0.14 per unit of risk. If you would invest  368.00  in MagnaChip Semiconductor Corp on December 22, 2024 and sell it today you would lose (2.00) from holding MagnaChip Semiconductor Corp or give up 0.54% 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.  Toll Brothers

MagnaChip Semiconductor

Risk-Adjusted Performance

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.

Toll Brothers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toll Brothers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with MagnaChip Semiconductor and Toll Brothers

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

The idea behind MagnaChip Semiconductor Corp and Toll Brothers 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.