Correlation Between American Water and MagnaChip Semiconductor
Can any of the company-specific risk be diversified away by investing in both American Water 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 American Water and MagnaChip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Water Works and MagnaChip Semiconductor Corp, you can compare the effects of market volatilities on American Water 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 American Water with a short position of MagnaChip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Water and MagnaChip Semiconductor.
Diversification Opportunities for American Water and MagnaChip Semiconductor
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between American and MagnaChip is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding American Water Works and MagnaChip Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and American Water 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 American Water Works 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 American Water i.e., American Water and MagnaChip Semiconductor go up and down completely randomly.
Pair Corralation between American Water and MagnaChip Semiconductor
Assuming the 90 days horizon American Water Works is expected to generate 0.47 times more return on investment than MagnaChip Semiconductor. However, American Water Works is 2.11 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 -0.02 per unit of risk. If you would invest 11,920 in American Water Works on October 13, 2024 and sell it today you would earn a total of 20.00 from holding American Water Works or generate 0.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Water Works vs. MagnaChip Semiconductor Corp
Performance |
| Timeline |
| American Water Works |
| MagnaChip Semiconductor |
American Water and MagnaChip Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Water and MagnaChip Semiconductor
The main advantage of trading using opposite American Water and MagnaChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Water 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.| American Water vs. MagnaChip Semiconductor Corp | American Water vs. JAPAN TOBACCO UNSPADR12 | American Water vs. SLR Investment Corp | American Water vs. Scottish Mortgage 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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