Correlation Between TOREX SEMICONDUCTOR and Magnachip Semiconductor
Can any of the company-specific risk be diversified away by investing in both TOREX SEMICONDUCTOR 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 TOREX SEMICONDUCTOR and Magnachip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TOREX SEMICONDUCTOR LTD and Magnachip Semiconductor, you can compare the effects of market volatilities on TOREX SEMICONDUCTOR 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 TOREX SEMICONDUCTOR with a short position of Magnachip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOREX SEMICONDUCTOR and Magnachip Semiconductor.
Diversification Opportunities for TOREX SEMICONDUCTOR and Magnachip Semiconductor
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TOREX and Magnachip is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding TOREX SEMICONDUCTOR LTD and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and TOREX 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 TOREX SEMICONDUCTOR LTD 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 TOREX SEMICONDUCTOR i.e., TOREX SEMICONDUCTOR and Magnachip Semiconductor go up and down completely randomly.
Pair Corralation between TOREX SEMICONDUCTOR and Magnachip Semiconductor
Assuming the 90 days horizon TOREX SEMICONDUCTOR LTD is expected to generate 0.51 times more return on investment than Magnachip Semiconductor. However, TOREX SEMICONDUCTOR LTD is 1.96 times less risky than Magnachip Semiconductor. It trades about -0.28 of its potential returns per unit of risk. Magnachip Semiconductor is currently generating about -0.28 per unit of risk. If you would invest 870.00 in TOREX SEMICONDUCTOR LTD on August 25, 2024 and sell it today you would lose (105.00) from holding TOREX SEMICONDUCTOR LTD or give up 12.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TOREX SEMICONDUCTOR LTD vs. Magnachip Semiconductor
Performance |
| Timeline |
| TOREX SEMICONDUCTOR LTD |
| Magnachip Semiconductor |
TOREX SEMICONDUCTOR and Magnachip Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TOREX SEMICONDUCTOR and Magnachip Semiconductor
The main advantage of trading using opposite TOREX SEMICONDUCTOR and Magnachip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOREX SEMICONDUCTOR 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.| TOREX SEMICONDUCTOR vs. NVIDIA | TOREX SEMICONDUCTOR vs. NVIDIA | TOREX SEMICONDUCTOR vs. QUALCOMM Incorporated | TOREX SEMICONDUCTOR vs. Advanced Micro Devices |
| Magnachip Semiconductor vs. NVIDIA | Magnachip Semiconductor vs. NVIDIA | Magnachip Semiconductor vs. QUALCOMM Incorporated | Magnachip Semiconductor vs. Advanced Micro Devices |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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