Correlation Between Fastighets and MagnaChip Semiconductor

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

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

Diversification Opportunities for Fastighets and MagnaChip Semiconductor

0.62

Correlation Coefficient

Fastighets  MagnaChip Semiconductor

Poor diversification

The 3 months correlation between Fastighets and MagnaChip is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fastighets AB Balder and MagnaChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and Fastighets 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 Fastighets AB Balder 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 Fastighets i.e., Fastighets and MagnaChip Semiconductor go up and down completely randomly.

Pair Corralation between Fastighets and MagnaChip Semiconductor

Assuming the 90 days horizon Fastighets AB Balder is expected to under-perform the MagnaChip Semiconductor. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fastighets AB Balder is 1.29 times less risky than MagnaChip Semiconductor. The pink sheet trades about -0.13 of its potential returns per unit of risk. The MagnaChip Semiconductor is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  467.00  in MagnaChip Semiconductor on September 28, 2024 and sell it today you would lose (47.00) from holding MagnaChip Semiconductor or give up 10.06% of portfolio value over 90 days.

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

Fastighets AB Balder  vs.  MagnaChip Semiconductor

Fastighets AB Balder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fastighets AB Balder has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing 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. 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 Fastighets and MagnaChip Semiconductor

The main advantage of trading using opposite Fastighets and MagnaChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fastighets 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 Fastighets AB Balder 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.