Correlation Between Magnachip Semiconductor and Lloyds Banking

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

Diversification Opportunities for Magnachip Semiconductor and Lloyds Banking

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Magnachip and Lloyds is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Magnachip Semiconductor and Lloyds Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lloyds Banking 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 Lloyds Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lloyds Banking Group has no effect on the direction of Magnachip Semiconductor i.e., Magnachip Semiconductor and Lloyds Banking go up and down completely randomly.

Pair Corralation between Magnachip Semiconductor and Lloyds Banking

Assuming the 90 days horizon Magnachip Semiconductor is expected to under-perform the Lloyds Banking. In addition to that, Magnachip Semiconductor is 1.18 times more volatile than Lloyds Banking Group. It trades about -0.06 of its total potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.03 per unit of volatility. If you would invest  54.00  in Lloyds Banking Group on October 16, 2024 and sell it today you would earn a total of  9.00  from holding Lloyds Banking Group or generate 16.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Magnachip Semiconductor  vs.  Lloyds Banking Group

 Performance 
       Timeline  
Magnachip Semiconductor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Magnachip Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Magnachip Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Lloyds Banking Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Lloyds Banking Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Magnachip Semiconductor and Lloyds Banking Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Magnachip Semiconductor and Lloyds Banking

The main advantage of trading using opposite Magnachip Semiconductor and Lloyds Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnachip Semiconductor position performs unexpectedly, Lloyds Banking 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 Lloyds Banking will offset losses from the drop in Lloyds Banking's long position.
The idea behind Magnachip Semiconductor and Lloyds Banking Group 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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