Correlation Between Magnachip Semiconductor and Ameriprise Financial

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

By analyzing existing cross correlation between Magnachip Semiconductor and Ameriprise Financial, you can compare the effects of market volatilities on Magnachip Semiconductor and Ameriprise Financial 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 Ameriprise Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnachip Semiconductor and Ameriprise Financial.

Diversification Opportunities for Magnachip Semiconductor and Ameriprise Financial

-0.55

Correlation Coefficient

Magnachip Semiconductor  Ameriprise Financial

Excellent diversification

The 3 months correlation between Magnachip and Ameriprise is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Magnachip Semiconductor and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial 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 Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Magnachip Semiconductor i.e., Magnachip Semiconductor and Ameriprise Financial go up and down completely randomly.

Pair Corralation between Magnachip Semiconductor and Ameriprise Financial

Assuming the 90 days horizon Magnachip Semiconductor is expected to under-perform the Ameriprise Financial. In addition to that, Magnachip Semiconductor is 1.51 times more volatile than Ameriprise Financial. It trades about 0.0 of its total potential returns per unit of risk. Ameriprise Financial is currently generating about 0.25 per unit of volatility. If you would invest  39,714  in Ameriprise Financial on September 4, 2024 and sell it today you would earn a total of  13,986  from holding Ameriprise Financial or generate 35.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Magnachip Semiconductor  vs.  Ameriprise Financial

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.

Ameriprise Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ameriprise Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnachip Semiconductor and Ameriprise Financial

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

The idea behind Magnachip Semiconductor and Ameriprise Financial 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.