Correlation Between MagnaChip Semiconductor and United Rentals

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

Diversification Opportunities for MagnaChip Semiconductor and United Rentals

0.01

Correlation Coefficient

MagnaChip Semiconductor  United Rentals

Significant diversification

The 3 months correlation between MagnaChip and United is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor Corp and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals 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 United Rentals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and United Rentals go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and United Rentals

Assuming the 90 days trading horizon MagnaChip Semiconductor Corp is expected to under-perform the United Rentals. But the stock apears to be less risky and, when comparing its historical volatility, MagnaChip Semiconductor Corp is 1.2 times less risky than United Rentals. The stock trades about -0.04 of its potential returns per unit of risk. The United Rentals is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  68,120  in United Rentals on October 25, 2024 and sell it today you would earn a total of  6,540  from holding United Rentals or generate 9.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

MagnaChip Semiconductor Corp  vs.  United Rentals

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 latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

United Rentals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, United Rentals 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 United Rentals

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

The idea behind MagnaChip Semiconductor Corp and United Rentals 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .