Correlation Between Norwegian Air and MagnaChip Semiconductor
Can any of the company-specific risk be diversified away by investing in both Norwegian Air 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 Norwegian Air and MagnaChip Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norwegian Air Shuttle and MagnaChip Semiconductor Corp, you can compare the effects of market volatilities on Norwegian Air 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 Norwegian Air with a short position of MagnaChip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and MagnaChip Semiconductor.
Diversification Opportunities for Norwegian Air and MagnaChip Semiconductor
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Norwegian and MagnaChip is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and MagnaChip Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and Norwegian Air 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 Norwegian Air Shuttle 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 Norwegian Air i.e., Norwegian Air and MagnaChip Semiconductor go up and down completely randomly.
Pair Corralation between Norwegian Air and MagnaChip Semiconductor
Assuming the 90 days horizon Norwegian Air Shuttle is expected to under-perform the MagnaChip Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Norwegian Air Shuttle is 1.27 times less risky than MagnaChip Semiconductor. The stock trades about -0.07 of its potential returns per unit of risk. The MagnaChip Semiconductor Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 396.00 in MagnaChip Semiconductor Corp on November 8, 2024 and sell it today you would earn a total of 32.00 from holding MagnaChip Semiconductor Corp or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. MagnaChip Semiconductor Corp
Performance |
| Timeline |
| Norwegian Air Shuttle |
| MagnaChip Semiconductor |
Norwegian Air and MagnaChip Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and MagnaChip Semiconductor
The main advantage of trading using opposite Norwegian Air and MagnaChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air 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.| Norwegian Air vs. Reinsurance Group of | Norwegian Air vs. HANOVER INSURANCE | Norwegian Air vs. The Hanover Insurance | Norwegian Air vs. UNIQA INSURANCE GR |
| MagnaChip Semiconductor vs. PRECISION DRILLING P | MagnaChip Semiconductor vs. Addtech AB | MagnaChip Semiconductor vs. Minerals Technologies | MagnaChip Semiconductor vs. CARSALESCOM |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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