Correlation Between Superior Plus and Magnachip Semiconductor

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

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

Diversification Opportunities for Superior Plus and Magnachip Semiconductor

0.69

Correlation Coefficient

Superior Plus  Magnachip Semiconductor

Poor diversification

The 3 months correlation between Superior and Magnachip is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and Superior Plus 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 Superior Plus 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 Superior Plus i.e., Superior Plus and Magnachip Semiconductor go up and down completely randomly.

Pair Corralation between Superior Plus and Magnachip Semiconductor

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the Magnachip Semiconductor. In addition to that, Superior Plus is 1.05 times more volatile than Magnachip Semiconductor. It trades about -0.05 of its total potential returns per unit of risk. Magnachip Semiconductor is currently generating about 0.0 per unit of volatility. If you would invest  394.00  in Magnachip Semiconductor on September 16, 2024 and sell it today you would lose (16.00) from holding Magnachip Semiconductor or give up 4.06% of portfolio value over 90 days.

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

Superior Plus Corp  vs.  Magnachip Semiconductor

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 Superior Plus and Magnachip Semiconductor

The main advantage of trading using opposite Superior Plus and Magnachip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus 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 Superior Plus 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.