Correlation Between Hua Hong and Magnachip Semiconductor
Can any of the company-specific risk be diversified away by investing in both Hua Hong 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 Hua Hong and Magnachip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hua Hong Semiconductor and Magnachip Semiconductor, you can compare the effects of market volatilities on Hua Hong 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 Hua Hong with a short position of Magnachip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hua Hong and Magnachip Semiconductor.
Diversification Opportunities for Hua Hong and Magnachip Semiconductor
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Hua and Magnachip is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hua Hong Semiconductor and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and Hua Hong 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 Hua Hong Semiconductor 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 Hua Hong i.e., Hua Hong and Magnachip Semiconductor go up and down completely randomly.
Pair Corralation between Hua Hong and Magnachip Semiconductor
Assuming the 90 days horizon Hua Hong Semiconductor is expected to generate 1.66 times more return on investment than Magnachip Semiconductor. However, Hua Hong is 1.66 times more volatile than Magnachip Semiconductor. It trades about 0.07 of its potential returns per unit of risk. Magnachip Semiconductor is currently generating about -0.03 per unit of risk. If you would invest 165.00 in Hua Hong Semiconductor on October 12, 2024 and sell it today you would earn a total of 93.00 from holding Hua Hong Semiconductor or generate 56.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hua Hong Semiconductor vs. Magnachip Semiconductor
Performance |
| Timeline |
| Hua Hong Semiconductor |
| Magnachip Semiconductor |
Hua Hong and Magnachip Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hua Hong and Magnachip Semiconductor
The main advantage of trading using opposite Hua Hong and Magnachip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hua Hong 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.| Hua Hong vs. Guangdong Investment Limited | Hua Hong vs. Auto Trader Group | Hua Hong vs. MARKET VECTR RETAIL | Hua Hong vs. PennantPark 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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