Correlation Between Apple and MagnaChip Semiconductor
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and MagnaChip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and MagnaChip Semiconductor Corp, you can compare the effects of market volatilities on Apple 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 Apple with a short position of MagnaChip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and MagnaChip Semiconductor.
Diversification Opportunities for Apple and MagnaChip Semiconductor
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Apple and MagnaChip is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and MagnaChip Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and Apple 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 Apple Inc 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 Apple i.e., Apple and MagnaChip Semiconductor go up and down completely randomly.
Pair Corralation between Apple and MagnaChip Semiconductor
Assuming the 90 days trading horizon Apple is expected to generate 1.33 times less return on investment than MagnaChip Semiconductor. But when comparing it to its historical volatility, Apple Inc is 3.08 times less risky than MagnaChip Semiconductor. It trades about 0.44 of its potential returns per unit of risk. MagnaChip Semiconductor Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 356.00 in MagnaChip Semiconductor Corp on September 2, 2024 and sell it today you would earn a total of 42.00 from holding MagnaChip Semiconductor Corp or generate 11.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. MagnaChip Semiconductor Corp
Performance |
| Timeline |
| Apple Inc |
| MagnaChip Semiconductor |
Apple and MagnaChip Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and MagnaChip Semiconductor
The main advantage of trading using opposite Apple and MagnaChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc and MagnaChip Semiconductor Corp 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.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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