Correlation Between Varta AG and Magnachip Semiconductor

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

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

Diversification Opportunities for Varta AG and Magnachip Semiconductor

0.25

Correlation Coefficient

Varta AG  Magnachip Semiconductor

Modest diversification

The 3 months correlation between Varta and Magnachip is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and Varta AG 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 Varta AG 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 Varta AG i.e., Varta AG and Magnachip Semiconductor go up and down completely randomly.

Pair Corralation between Varta AG and Magnachip Semiconductor

Assuming the 90 days trading horizon Varta AG is expected to generate 324.94 times less return on investment than Magnachip Semiconductor. In addition to that, Varta AG is 1.62 times more volatile than Magnachip Semiconductor. It trades about 0.0 of its total potential returns per unit of risk. Magnachip Semiconductor is currently generating about 0.21 per unit of volatility. If you would invest  370.00  in Magnachip Semiconductor on October 22, 2024 and sell it today you would earn a total of  32.00  from holding Magnachip Semiconductor or generate 8.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Varta AG  vs.  Magnachip Semiconductor

Varta AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Varta AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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. Despite nearly stable basic indicators, Magnachip Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Varta AG and Magnachip Semiconductor

The main advantage of trading using opposite Varta AG and Magnachip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varta AG 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 Varta AG 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.