Correlation Between Cal Maine and Magnachip Semiconductor

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

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

Diversification Opportunities for Cal Maine and Magnachip Semiconductor

-0.21

Correlation Coefficient

Cal Maine  Magnachip Semiconductor

Very good diversification

The 3 months correlation between Cal and Magnachip is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and Cal Maine 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 Cal Maine Foods 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 Cal Maine i.e., Cal Maine and Magnachip Semiconductor go up and down completely randomly.

Pair Corralation between Cal Maine and Magnachip Semiconductor

Assuming the 90 days horizon Cal Maine Foods is expected to generate 0.72 times more return on investment than Magnachip Semiconductor. However, Cal Maine Foods is 1.39 times less risky than Magnachip Semiconductor. It trades about 0.31 of its potential returns per unit of risk. Magnachip Semiconductor is currently generating about -0.01 per unit of risk. If you would invest  6,121  in Cal Maine Foods on September 13, 2024 and sell it today you would earn a total of  3,447  from holding Cal Maine Foods or generate 56.31% return on investment over 90 days.

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

Cal Maine Foods  vs.  Magnachip Semiconductor

Cal Maine Foods

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cal Maine Foods are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Cal Maine reported solid returns over the last few months and may actually be approaching a breakup point.

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cal Maine and Magnachip Semiconductor

The main advantage of trading using opposite Cal Maine and Magnachip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine 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 Cal Maine Foods 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.