Correlation Between Valens and MagnaChip Semiconductor

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

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

Diversification Opportunities for Valens and MagnaChip Semiconductor

0.36

Correlation Coefficient

Valens  MagnaChip Semiconductor

Weak diversification

The 3 months correlation between Valens and MagnaChip is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Valens and MagnaChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and Valens 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 Valens 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 Valens i.e., Valens and MagnaChip Semiconductor go up and down completely randomly.

Pair Corralation between Valens and MagnaChip Semiconductor

Considering the 90-day investment horizon Valens is expected to under-perform the MagnaChip Semiconductor. In addition to that, Valens is 2.19 times more volatile than MagnaChip Semiconductor. It trades about -0.02 of its total potential returns per unit of risk. MagnaChip Semiconductor is currently generating about 0.02 per unit of volatility. If you would invest  386.00  in MagnaChip Semiconductor on September 23, 2024 and sell it today you would earn a total of  1.00  from holding MagnaChip Semiconductor or generate 0.26% return on investment over 90 days.

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

Valens  vs.  MagnaChip Semiconductor

Valens

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm 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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Valens and MagnaChip Semiconductor

The main advantage of trading using opposite Valens and MagnaChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valens 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 Valens 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.