Correlation Between MagnaChip Semiconductor and Encore Capital
Can any of the company-specific risk be diversified away by investing in both MagnaChip Semiconductor and Encore Capital 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 Encore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MagnaChip Semiconductor and Encore Capital Group, you can compare the effects of market volatilities on MagnaChip Semiconductor and Encore Capital 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 Encore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of MagnaChip Semiconductor and Encore Capital.
Diversification Opportunities for MagnaChip Semiconductor and Encore Capital
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MagnaChip and Encore is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and Encore Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encore Capital Group 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 Encore Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encore Capital Group has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and Encore Capital go up and down completely randomly.
Pair Corralation between MagnaChip Semiconductor and Encore Capital
Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to under-perform the Encore Capital. In addition to that, MagnaChip Semiconductor is 1.62 times more volatile than Encore Capital Group. It trades about -0.05 of its total potential returns per unit of risk. Encore Capital Group is currently generating about 0.06 per unit of volatility. If you would invest 4,587 in Encore Capital Group on September 12, 2024 and sell it today you would earn a total of 294.00 from holding Encore Capital Group or generate 6.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MagnaChip Semiconductor vs. Encore Capital Group
Performance |
| Timeline |
| MagnaChip Semiconductor |
| Encore Capital Group |
MagnaChip Semiconductor and Encore Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MagnaChip Semiconductor and Encore Capital
The main advantage of trading using opposite MagnaChip Semiconductor and Encore Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MagnaChip Semiconductor position performs unexpectedly, Encore Capital 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 Encore Capital will offset losses from the drop in Encore Capital's long position.| MagnaChip Semiconductor vs. CEVA Inc | MagnaChip Semiconductor vs. MACOM Technology Solutions | MagnaChip Semiconductor vs. FormFactor | MagnaChip Semiconductor vs. MaxLinear |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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