Correlation Between ALTRIA and MagnaChip Semiconductor

Can any of the company-specific risk be diversified away by investing in both ALTRIA and MagnaChip Semiconductor 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 ALTRIA and MagnaChip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ALTRIA GROUP INC and MagnaChip Semiconductor, you can compare the effects of market volatilities on ALTRIA and MagnaChip Semiconductor 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 ALTRIA with a short position of MagnaChip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALTRIA and MagnaChip Semiconductor.

Diversification Opportunities for ALTRIA and MagnaChip Semiconductor

0.08

Correlation Coefficient

ALTRIA  MagnaChip Semiconductor

Significant diversification

The 3 months correlation between ALTRIA and MagnaChip is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding ALTRIA GROUP INC and MagnaChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and ALTRIA 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 ALTRIA GROUP INC are associated (or correlated) with MagnaChip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MagnaChip Semiconductor has no effect on the direction of ALTRIA i.e., ALTRIA and MagnaChip Semiconductor go up and down completely randomly.

Pair Corralation between ALTRIA and MagnaChip Semiconductor

Assuming the 90 days trading horizon ALTRIA GROUP INC is expected to generate 0.16 times more return on investment than MagnaChip Semiconductor. However, ALTRIA GROUP INC is 6.36 times less risky than MagnaChip Semiconductor. It trades about -0.1 of its potential returns per unit of risk. MagnaChip Semiconductor is currently generating about -0.05 per unit of risk. If you would invest  9,653  in ALTRIA GROUP INC on October 8, 2024 and sell it today you would lose (272.00) from holding ALTRIA GROUP INC or give up 2.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.71%
Values	Daily Returns

ALTRIA GROUP INC  vs.  MagnaChip Semiconductor

ALTRIA GROUP INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALTRIA GROUP INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALTRIA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

MagnaChip Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MagnaChip Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with ALTRIA and MagnaChip Semiconductor

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

The idea behind ALTRIA GROUP INC and MagnaChip Semiconductor 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.