Correlation Between Micron Technology and MagnaChip Semiconductor

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Can any of the company-specific risk be diversified away by investing in both Micron Technology 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 Micron Technology and MagnaChip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and MagnaChip Semiconductor, you can compare the effects of market volatilities on Micron Technology 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 Micron Technology with a short position of MagnaChip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and MagnaChip Semiconductor.

Diversification Opportunities for Micron Technology and MagnaChip Semiconductor

MicronMagnaChipDiversified AwayMicronMagnaChipDiversified Away100%
-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between Micron and MagnaChip is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and MagnaChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and Micron Technology 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 Micron Technology 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 Micron Technology i.e., Micron Technology and MagnaChip Semiconductor go up and down completely randomly.

Pair Corralation between Micron Technology and MagnaChip Semiconductor

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.34 times more return on investment than MagnaChip Semiconductor. However, Micron Technology is 1.34 times more volatile than MagnaChip Semiconductor. It trades about -0.01 of its potential returns per unit of risk. MagnaChip Semiconductor is currently generating about -0.02 per unit of risk. If you would invest  11,829  in Micron Technology on November 21, 2024 and sell it today you would lose (1,877) from holding Micron Technology or give up 15.87% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Micron Technology  vs.  MagnaChip Semiconductor

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20-10010
JavaScript chart by amCharts 3.21.15MU MX
       Timeline  
Micron Technology 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Over the last 90 days Micron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Micron Technology is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb859095100105110
MagnaChip Semiconductor 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in MagnaChip Semiconductor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, MagnaChip Semiconductor showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3.63.844.24.44.64.85

Micron Technology and MagnaChip Semiconductor Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.39-4.78-3.18-1.580.01.543.14.666.23 0.0250.0300.0350.0400.045
JavaScript chart by amCharts 3.21.15MU MX
       Returns  

Pair Trading with Micron Technology and MagnaChip Semiconductor

The main advantage of trading using opposite Micron Technology and MagnaChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology 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 Micron Technology and MagnaChip Semiconductor 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.
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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