Correlation Between MagnaChip Semiconductor and Tempur Sealy

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

Diversification Opportunities for MagnaChip Semiconductor and Tempur Sealy

-0.39

Correlation Coefficient

MagnaChip Semiconductor  Tempur Sealy

Very good diversification

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

Pair Corralation between MagnaChip Semiconductor and Tempur Sealy

Assuming the 90 days trading horizon MagnaChip Semiconductor Corp is expected to under-perform the Tempur Sealy. In addition to that, MagnaChip Semiconductor is 1.33 times more volatile than Tempur Sealy International. It trades about -0.03 of its total potential returns per unit of risk. Tempur Sealy International is currently generating about 0.08 per unit of volatility. If you would invest  4,436  in Tempur Sealy International on September 15, 2024 and sell it today you would earn a total of  914.00  from holding Tempur Sealy International or generate 20.6% 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.  Tempur Sealy International

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.

Tempur Sealy Interna

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tempur Sealy International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Tempur Sealy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MagnaChip Semiconductor and Tempur Sealy

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

The idea behind MagnaChip Semiconductor Corp and Tempur Sealy International 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.