Correlation Between Host Hotels and MagnaChip Semiconductor
Can any of the company-specific risk be diversified away by investing in both Host Hotels 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 Host Hotels and MagnaChip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Host Hotels Resorts and MagnaChip Semiconductor Corp, you can compare the effects of market volatilities on Host Hotels 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 Host Hotels with a short position of MagnaChip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and MagnaChip Semiconductor.
Diversification Opportunities for Host Hotels and MagnaChip Semiconductor
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Host and MagnaChip is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts and MagnaChip Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and Host Hotels 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 Host Hotels Resorts 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 Host Hotels i.e., Host Hotels and MagnaChip Semiconductor go up and down completely randomly.
Pair Corralation between Host Hotels and MagnaChip Semiconductor
Assuming the 90 days horizon Host Hotels Resorts is expected to generate 0.69 times more return on investment than MagnaChip Semiconductor. However, Host Hotels Resorts is 1.45 times less risky than MagnaChip Semiconductor. It trades about 0.04 of its potential returns per unit of risk. MagnaChip Semiconductor Corp is currently generating about -0.03 per unit of risk. If you would invest 1,600 in Host Hotels Resorts on September 1, 2024 and sell it today you would earn a total of 130.00 from holding Host Hotels Resorts or generate 8.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Host Hotels Resorts vs. MagnaChip Semiconductor Corp
Performance |
| Timeline |
| Host Hotels Resorts |
| MagnaChip Semiconductor |
Host Hotels and MagnaChip Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Host Hotels and MagnaChip Semiconductor
The main advantage of trading using opposite Host Hotels and MagnaChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Host Hotels 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 Host Hotels Resorts 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.| MagnaChip Semiconductor vs. Cardinal Health | MagnaChip Semiconductor vs. SMA Solar Technology | MagnaChip Semiconductor vs. Ramsay Health Care | MagnaChip Semiconductor vs. AECOM TECHNOLOGY |
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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