Correlation Between Holmen AB and Magnachip Semiconductor
Can any of the company-specific risk be diversified away by investing in both Holmen AB 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 Holmen AB and Magnachip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Holmen AB and Magnachip Semiconductor, you can compare the effects of market volatilities on Holmen AB 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 Holmen AB with a short position of Magnachip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holmen AB and Magnachip Semiconductor.
Diversification Opportunities for Holmen AB and Magnachip Semiconductor
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Holmen and Magnachip is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Holmen AB and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and Holmen AB 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 Holmen AB 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 Holmen AB i.e., Holmen AB and Magnachip Semiconductor go up and down completely randomly.
Pair Corralation between Holmen AB and Magnachip Semiconductor
Assuming the 90 days trading horizon Holmen AB is expected to generate 0.73 times more return on investment than Magnachip Semiconductor. However, Holmen AB is 1.37 times less risky than Magnachip Semiconductor. It trades about 0.03 of its potential returns per unit of risk. Magnachip Semiconductor is currently generating about -0.07 per unit of risk. If you would invest 2,843 in Holmen AB on August 24, 2024 and sell it today you would earn a total of 705.00 from holding Holmen AB or generate 24.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Holmen AB vs. Magnachip Semiconductor
Performance |
| Timeline |
| Holmen AB |
| Magnachip Semiconductor |
Holmen AB and Magnachip Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Holmen AB and Magnachip Semiconductor
The main advantage of trading using opposite Holmen AB and Magnachip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holmen AB 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.| Holmen AB vs. Magnachip Semiconductor | Holmen AB vs. PUBLIC STORAGE PRFO | Holmen AB vs. Tower Semiconductor | Holmen AB vs. Hyrican Informationssysteme Aktiengesellschaft |
| Magnachip Semiconductor vs. NVIDIA | Magnachip Semiconductor vs. NVIDIA | Magnachip Semiconductor vs. Taiwan Semiconductor Manufacturing | Magnachip Semiconductor vs. QUALCOMM Incorporated |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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