Correlation Between Valens and MagnaChip Semiconductor

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

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

Diversification Opportunities for Valens and MagnaChip Semiconductor

0.48

Correlation Coefficient

Valens  MagnaChip Semiconductor

Very weak diversification

The 3 months correlation between Valens and MagnaChip is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Valens and MagnaChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and Valens 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 Valens 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 Valens i.e., Valens and MagnaChip Semiconductor go up and down completely randomly.

Pair Corralation between Valens and MagnaChip Semiconductor

Considering the 90-day investment horizon Valens is expected to generate 1.44 times more return on investment than MagnaChip Semiconductor. However, Valens is 1.44 times more volatile than MagnaChip Semiconductor. It trades about -0.01 of its potential returns per unit of risk. MagnaChip Semiconductor is currently generating about -0.01 per unit of risk. If you would invest  212.00  in Valens on September 2, 2024 and sell it today you would lose (15.00) from holding Valens or give up 7.08% of portfolio value over 90 days.

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

Valens  vs.  MagnaChip Semiconductor

Valens

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Valens is not utilizing all of its potentials. The current stock price disarray, 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Valens and MagnaChip Semiconductor

The main advantage of trading using opposite Valens and MagnaChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valens 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 Valens 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.