Correlation Between MagnaChip Semiconductor and WisdomTree Investments

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

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

Diversification Opportunities for MagnaChip Semiconductor and WisdomTree Investments

-0.48

Correlation Coefficient

MagnaChip Semiconductor  WisdomTree Investments

Very good diversification

The 3 months correlation between MagnaChip and WisdomTree is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor Corp and WisdomTree Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Investments 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 Corp are associated (or correlated) with WisdomTree Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Investments has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and WisdomTree Investments go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and WisdomTree Investments

Assuming the 90 days trading horizon MagnaChip Semiconductor Corp is expected to generate 0.94 times more return on investment than WisdomTree Investments. However, MagnaChip Semiconductor Corp is 1.06 times less risky than WisdomTree Investments. It trades about 0.12 of its potential returns per unit of risk. WisdomTree Investments is currently generating about 0.05 per unit of risk. If you would invest  360.00  in MagnaChip Semiconductor Corp on September 13, 2024 and sell it today you would earn a total of  28.00  from holding MagnaChip Semiconductor Corp or generate 7.78% return on investment over 90 days.

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

MagnaChip Semiconductor Corp  vs.  WisdomTree Investments

MagnaChip Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MagnaChip Semiconductor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile 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.

WisdomTree Investments

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Investments are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WisdomTree Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MagnaChip Semiconductor and WisdomTree Investments

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

The idea behind MagnaChip Semiconductor Corp and WisdomTree Investments 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.