Correlation Between JAPAN TOBACCO and Magnachip Semiconductor
Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO 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 JAPAN TOBACCO and Magnachip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN TOBACCO UNSPADR12 and Magnachip Semiconductor, you can compare the effects of market volatilities on JAPAN TOBACCO 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 JAPAN TOBACCO with a short position of Magnachip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and Magnachip Semiconductor.
Diversification Opportunities for JAPAN TOBACCO and Magnachip Semiconductor
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between JAPAN and Magnachip is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and JAPAN TOBACCO 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 JAPAN TOBACCO UNSPADR12 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 JAPAN TOBACCO i.e., JAPAN TOBACCO and Magnachip Semiconductor go up and down completely randomly.
Pair Corralation between JAPAN TOBACCO and Magnachip Semiconductor
Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to generate 0.63 times more return on investment than Magnachip Semiconductor. However, JAPAN TOBACCO UNSPADR12 is 1.6 times less risky than Magnachip Semiconductor. It trades about 0.05 of its potential returns per unit of risk. Magnachip Semiconductor is currently generating about -0.04 per unit of risk. If you would invest 870.00 in JAPAN TOBACCO UNSPADR12 on November 9, 2024 and sell it today you would earn a total of 320.00 from holding JAPAN TOBACCO UNSPADR12 or generate 36.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAPAN TOBACCO UNSPADR12 vs. Magnachip Semiconductor
Performance |
| Timeline |
| JAPAN TOBACCO UNSPADR12 |
| Magnachip Semiconductor |
JAPAN TOBACCO and Magnachip Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN TOBACCO and Magnachip Semiconductor
The main advantage of trading using opposite JAPAN TOBACCO and Magnachip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO 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.| JAPAN TOBACCO vs. US Physical Therapy | JAPAN TOBACCO vs. OPKO HEALTH | JAPAN TOBACCO vs. Phibro Animal Health | JAPAN TOBACCO vs. Renesas Electronics |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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