Correlation Between Magnachip Semiconductor and ELMOS SEMICONDUCTOR

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

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

Diversification Opportunities for Magnachip Semiconductor and ELMOS SEMICONDUCTOR

0.23

Correlation Coefficient

Magnachip Semiconductor  ELMOS SEMICONDUCTOR

Modest diversification

The 3 months correlation between Magnachip and ELMOS is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Magnachip Semiconductor and ELMOS SEMICONDUCTOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELMOS SEMICONDUCTOR has no effect on the direction of Magnachip Semiconductor i.e., Magnachip Semiconductor and ELMOS SEMICONDUCTOR go up and down completely randomly.

Pair Corralation between Magnachip Semiconductor and ELMOS SEMICONDUCTOR

Assuming the 90 days horizon Magnachip Semiconductor is expected to generate 0.95 times more return on investment than ELMOS SEMICONDUCTOR. However, Magnachip Semiconductor is 1.06 times less risky than ELMOS SEMICONDUCTOR. It trades about 0.0 of its potential returns per unit of risk. ELMOS SEMICONDUCTOR is currently generating about -0.08 per unit of risk. If you would invest  398.00  in Magnachip Semiconductor on September 4, 2024 and sell it today you would lose (12.00) from holding Magnachip Semiconductor or give up 3.02% of portfolio value over 90 days.

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

Magnachip Semiconductor  vs.  ELMOS SEMICONDUCTOR

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.

ELMOS SEMICONDUCTOR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ELMOS SEMICONDUCTOR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Magnachip Semiconductor and ELMOS SEMICONDUCTOR

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

The idea behind Magnachip Semiconductor and ELMOS 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.