Correlation Between Boot Barn and MagnaChip Semiconductor

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

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

Diversification Opportunities for Boot Barn and MagnaChip Semiconductor

0.8

Correlation Coefficient

Boot Barn  MagnaChip Semiconductor

Very poor diversification

The 3 months correlation between Boot and MagnaChip is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Boot Barn Holdings and MagnaChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and Boot Barn 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 Boot Barn Holdings 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 Boot Barn i.e., Boot Barn and MagnaChip Semiconductor go up and down completely randomly.

Pair Corralation between Boot Barn and MagnaChip Semiconductor

Given the investment horizon of 90 days Boot Barn Holdings is expected to generate 1.13 times more return on investment than MagnaChip Semiconductor. However, Boot Barn is 1.13 times more volatile than MagnaChip Semiconductor. It trades about -0.03 of its potential returns per unit of risk. MagnaChip Semiconductor is currently generating about -0.08 per unit of risk. If you would invest  16,435  in Boot Barn Holdings on September 21, 2024 and sell it today you would lose (1,648) from holding Boot Barn Holdings or give up 10.02% of portfolio value over 90 days.

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

Boot Barn Holdings  vs.  MagnaChip Semiconductor

Boot Barn Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boot Barn Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private 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 weak 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 Boot Barn and MagnaChip Semiconductor

The main advantage of trading using opposite Boot Barn and MagnaChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boot Barn 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 Boot Barn Holdings 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.

Check out your portfolio center.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.