Correlation Between Advanced Micro and Magnachip Semiconductor
Can any of the company-specific risk be diversified away by investing in both Advanced Micro 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 Advanced Micro and Magnachip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Micro Devices and Magnachip Semiconductor, you can compare the effects of market volatilities on Advanced Micro 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 Advanced Micro with a short position of Magnachip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Micro and Magnachip Semiconductor.
Diversification Opportunities for Advanced Micro and Magnachip Semiconductor
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Advanced and Magnachip is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and Advanced Micro 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 Advanced Micro Devices 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 Advanced Micro i.e., Advanced Micro and Magnachip Semiconductor go up and down completely randomly.
Pair Corralation between Advanced Micro and Magnachip Semiconductor
Assuming the 90 days horizon Advanced Micro Devices is expected to generate 1.1 times more return on investment than Magnachip Semiconductor. However, Advanced Micro is 1.1 times more volatile than Magnachip Semiconductor. It trades about 0.03 of its potential returns per unit of risk. Magnachip Semiconductor is currently generating about -0.03 per unit of risk. If you would invest 8,542 in Advanced Micro Devices on November 27, 2024 and sell it today you would earn a total of 2,036 from holding Advanced Micro Devices or generate 23.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Micro Devices vs. Magnachip Semiconductor
Performance |
| Timeline |
| Advanced Micro Devices |
| Magnachip Semiconductor |
Advanced Micro and Magnachip Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Micro and Magnachip Semiconductor
The main advantage of trading using opposite Advanced Micro and Magnachip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Micro 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.| Advanced Micro vs. Infrastrutture Wireless Italiane | Advanced Micro vs. IRONVELD PLC LS | Advanced Micro vs. TOMBADOR IRON LTD | Advanced Micro vs. Office Properties Income |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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