Correlation Between MagnaChip Semiconductor and Cumberland Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both MagnaChip Semiconductor and Cumberland Pharmaceuticals 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 MagnaChip Semiconductor and Cumberland Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MagnaChip Semiconductor and Cumberland Pharmaceuticals, you can compare the effects of market volatilities on MagnaChip Semiconductor and Cumberland Pharmaceuticals 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 MagnaChip Semiconductor with a short position of Cumberland Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of MagnaChip Semiconductor and Cumberland Pharmaceuticals.
Diversification Opportunities for MagnaChip Semiconductor and Cumberland Pharmaceuticals
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MagnaChip and Cumberland is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and Cumberland Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumberland Pharmaceuticals and MagnaChip Semiconductor 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 MagnaChip Semiconductor are associated (or correlated) with Cumberland Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cumberland Pharmaceuticals has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and Cumberland Pharmaceuticals go up and down completely randomly.
Pair Corralation between MagnaChip Semiconductor and Cumberland Pharmaceuticals
Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to under-perform the Cumberland Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, MagnaChip Semiconductor is 1.61 times less risky than Cumberland Pharmaceuticals. The stock trades about -0.05 of its potential returns per unit of risk. The Cumberland Pharmaceuticals is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 219.00 in Cumberland Pharmaceuticals on September 4, 2024 and sell it today you would lose (89.00) from holding Cumberland Pharmaceuticals or give up 40.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MagnaChip Semiconductor vs. Cumberland Pharmaceuticals
Performance |
| Timeline |
| MagnaChip Semiconductor |
| Cumberland Pharmaceuticals |
MagnaChip Semiconductor and Cumberland Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MagnaChip Semiconductor and Cumberland Pharmaceuticals
The main advantage of trading using opposite MagnaChip Semiconductor and Cumberland Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MagnaChip Semiconductor position performs unexpectedly, Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals will offset losses from the drop in Cumberland Pharmaceuticals' long position.| 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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