Correlation Between SBA Communications and MagnaChip Semiconductor
Can any of the company-specific risk be diversified away by investing in both SBA Communications 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 SBA Communications and MagnaChip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBA Communications Corp and MagnaChip Semiconductor Corp, you can compare the effects of market volatilities on SBA Communications 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 SBA Communications with a short position of MagnaChip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBA Communications and MagnaChip Semiconductor.
Diversification Opportunities for SBA Communications and MagnaChip Semiconductor
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SBA and MagnaChip is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SBA Communications Corp and MagnaChip Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and SBA Communications 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 SBA Communications Corp 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 SBA Communications i.e., SBA Communications and MagnaChip Semiconductor go up and down completely randomly.
Pair Corralation between SBA Communications and MagnaChip Semiconductor
Assuming the 90 days trading horizon SBA Communications Corp is expected to generate 0.62 times more return on investment than MagnaChip Semiconductor. However, SBA Communications Corp is 1.62 times less risky than MagnaChip Semiconductor. It trades about -0.01 of its potential returns per unit of risk. MagnaChip Semiconductor Corp is currently generating about -0.05 per unit of risk. If you would invest 21,181 in SBA Communications Corp on September 21, 2024 and sell it today you would lose (1,881) from holding SBA Communications Corp or give up 8.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBA Communications Corp vs. MagnaChip Semiconductor Corp
Performance |
| Timeline |
| SBA Communications Corp |
| MagnaChip Semiconductor |
SBA Communications and MagnaChip Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBA Communications and MagnaChip Semiconductor
The main advantage of trading using opposite SBA Communications and MagnaChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBA Communications 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.| SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc | SBA Communications vs. Apple Inc |
| MagnaChip Semiconductor vs. FAST RETAIL ADR | MagnaChip Semiconductor vs. NXP Semiconductors NV | MagnaChip Semiconductor vs. Nordic Semiconductor ASA | MagnaChip Semiconductor vs. Carsales |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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