Correlation Between Cisco Systems and MagnaChip Semiconductor
Can any of the company-specific risk be diversified away by investing in both Cisco Systems 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 Cisco Systems and MagnaChip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and MagnaChip Semiconductor, you can compare the effects of market volatilities on Cisco Systems 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 Cisco Systems with a short position of MagnaChip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and MagnaChip Semiconductor.
Diversification Opportunities for Cisco Systems and MagnaChip Semiconductor
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cisco and MagnaChip is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and MagnaChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and Cisco Systems 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 Cisco Systems 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 Cisco Systems i.e., Cisco Systems and MagnaChip Semiconductor go up and down completely randomly.
Pair Corralation between Cisco Systems and MagnaChip Semiconductor
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.27 times more return on investment than MagnaChip Semiconductor. However, Cisco Systems is 3.65 times less risky than MagnaChip Semiconductor. It trades about 0.26 of its potential returns per unit of risk. MagnaChip Semiconductor is currently generating about -0.2 per unit of risk. If you would invest 5,528 in Cisco Systems on August 27, 2024 and sell it today you would earn a total of 327.00 from holding Cisco Systems or generate 5.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. MagnaChip Semiconductor
Performance |
| Timeline |
| Cisco Systems |
| MagnaChip Semiconductor |
Cisco Systems and MagnaChip Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and MagnaChip Semiconductor
The main advantage of trading using opposite Cisco Systems and MagnaChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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.| Cisco Systems vs. Ichor Holdings | Cisco Systems vs. Fabrinet | Cisco Systems vs. Hello Group | Cisco Systems vs. Ultra Clean Holdings |
| MagnaChip Semiconductor vs. CEVA Inc | MagnaChip Semiconductor vs. MACOM Technology Solutions | MagnaChip Semiconductor vs. FormFactor | MagnaChip Semiconductor vs. MaxLinear |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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