Correlation Between MagnaChip Semiconductor and NextNav Warrant

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

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

Diversification Opportunities for MagnaChip Semiconductor and NextNav Warrant

-0.78

Correlation Coefficient

MagnaChip Semiconductor  NextNav Warrant

Pay attention - limited upside

The 3 months correlation between MagnaChip and NextNav is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and NextNav Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextNav Warrant and MagnaChip Semiconductor 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 MagnaChip Semiconductor are associated (or correlated) with NextNav Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextNav Warrant has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and NextNav Warrant go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and NextNav Warrant

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to under-perform the NextNav Warrant. But the stock apears to be less risky and, when comparing its historical volatility, MagnaChip Semiconductor is 1.7 times less risky than NextNav Warrant. The stock trades about -0.06 of its potential returns per unit of risk. The NextNav Warrant is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  257.00  in NextNav Warrant on September 14, 2024 and sell it today you would earn a total of  376.00  from holding NextNav Warrant or generate 146.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

MagnaChip Semiconductor  vs.  NextNav Warrant

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 unfluctuating 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.

NextNav Warrant

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in NextNav Warrant are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, NextNav Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MagnaChip Semiconductor and NextNav Warrant

The main advantage of trading using opposite MagnaChip Semiconductor and NextNav Warrant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MagnaChip Semiconductor position performs unexpectedly, NextNav Warrant 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 NextNav Warrant will offset losses from the drop in NextNav Warrant's long position.

The idea behind MagnaChip Semiconductor and NextNav Warrant 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.