Correlation Between SLR Investment and Magnachip Semiconductor

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

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

Diversification Opportunities for SLR Investment and Magnachip Semiconductor

0.84

Correlation Coefficient

SLR Investment  Magnachip Semiconductor

Very poor diversification

The 3 months correlation between SLR and Magnachip is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding SLR Investment Corp and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and SLR Investment 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 SLR Investment Corp 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 SLR Investment i.e., SLR Investment and Magnachip Semiconductor go up and down completely randomly.

Pair Corralation between SLR Investment and Magnachip Semiconductor

Assuming the 90 days horizon SLR Investment Corp is expected to generate 0.33 times more return on investment than Magnachip Semiconductor. However, SLR Investment Corp is 3.01 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 0.03 per unit of risk. If you would invest  1,559  in SLR Investment Corp on December 2, 2024 and sell it today you would earn a total of  95.00  from holding SLR Investment Corp or generate 6.09% return on investment over 90 days.

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

SLR Investment Corp  vs.  Magnachip Semiconductor

SLR Investment Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SLR Investment Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SLR Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Magnachip Semiconductor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Magnachip Semiconductor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Magnachip Semiconductor is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SLR Investment and Magnachip Semiconductor

The main advantage of trading using opposite SLR Investment and Magnachip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SLR Investment 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 SLR Investment Corp 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.