Correlation Between Sunoco and MagnaChip Semiconductor

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

By analyzing existing cross correlation between Sunoco LP 5875 and MagnaChip Semiconductor, you can compare the effects of market volatilities on Sunoco and MagnaChip 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 Sunoco with a short position of MagnaChip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunoco and MagnaChip Semiconductor.

Diversification Opportunities for Sunoco and MagnaChip Semiconductor

0.18

Correlation Coefficient

Sunoco  MagnaChip Semiconductor

Average diversification

The 3 months correlation between Sunoco and MagnaChip is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sunoco LP 5875 and MagnaChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and Sunoco 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 Sunoco LP 5875 are associated (or correlated) with MagnaChip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MagnaChip Semiconductor has no effect on the direction of Sunoco i.e., Sunoco and MagnaChip Semiconductor go up and down completely randomly.

Pair Corralation between Sunoco and MagnaChip Semiconductor

Assuming the 90 days trading horizon Sunoco LP 5875 is expected to under-perform the MagnaChip Semiconductor. But the bond apears to be less risky and, when comparing its historical volatility, Sunoco LP 5875 is 5.02 times less risky than MagnaChip Semiconductor. The bond trades about -0.11 of its potential returns per unit of risk. The MagnaChip Semiconductor is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  463.00  in MagnaChip Semiconductor on September 4, 2024 and sell it today you would lose (16.00) from holding MagnaChip Semiconductor or give up 3.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.19%
Values	Daily Returns

Sunoco LP 5875  vs.  MagnaChip Semiconductor

Sunoco LP 5875

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunoco LP 5875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sunoco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 fairly strong basic indicators, MagnaChip Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sunoco and MagnaChip Semiconductor

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

The idea behind Sunoco LP 5875 and MagnaChip 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.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.