Correlation Between MagnaChip Semiconductor and Zoom Video

Can any of the company-specific risk be diversified away by investing in both MagnaChip Semiconductor and Zoom Video 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 Zoom Video 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 Zoom Video Communications, you can compare the effects of market volatilities on MagnaChip Semiconductor and Zoom Video 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 Zoom Video. Check out your portfolio center. Please also check ongoing floating volatility patterns of MagnaChip Semiconductor and Zoom Video.

Diversification Opportunities for MagnaChip Semiconductor and Zoom Video

-0.63

Correlation Coefficient

MagnaChip Semiconductor  Zoom Video

Excellent diversification

The 3 months correlation between MagnaChip and Zoom is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor Corp and Zoom Video Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoom Video Communications 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 Zoom Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoom Video Communications has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and Zoom Video go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and Zoom Video

Assuming the 90 days trading horizon MagnaChip Semiconductor Corp is expected to under-perform the Zoom Video. In addition to that, MagnaChip Semiconductor is 1.46 times more volatile than Zoom Video Communications. It trades about -0.05 of its total potential returns per unit of risk. Zoom Video Communications is currently generating about 0.21 per unit of volatility. If you would invest  6,173  in Zoom Video Communications on September 23, 2024 and sell it today you would earn a total of  2,006  from holding Zoom Video Communications or generate 32.5% return on investment over 90 days.

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

MagnaChip Semiconductor Corp  vs.  Zoom Video Communications

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 uncertain 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.

Zoom Video Communications

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Zoom Video unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MagnaChip Semiconductor and Zoom Video

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

The idea behind MagnaChip Semiconductor Corp and Zoom Video Communications 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.