Correlation Between MagnaChip Semiconductor and British American
Can any of the company-specific risk be diversified away by investing in both MagnaChip Semiconductor and British American 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 British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MagnaChip Semiconductor Corp and British American Tobacco, you can compare the effects of market volatilities on MagnaChip Semiconductor and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of MagnaChip Semiconductor and British American.
Diversification Opportunities for MagnaChip Semiconductor and British American
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MagnaChip and British is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor Corp and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 Corp are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and British American go up and down completely randomly.
Pair Corralation between MagnaChip Semiconductor and British American
Assuming the 90 days trading horizon MagnaChip Semiconductor Corp is expected to under-perform the British American. In addition to that, MagnaChip Semiconductor is 5.9 times more volatile than British American Tobacco. It trades about -0.02 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.78 per unit of volatility. If you would invest 3,181 in British American Tobacco on August 31, 2024 and sell it today you would earn a total of 414.00 from holding British American Tobacco or generate 13.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
MagnaChip Semiconductor Corp vs. British American Tobacco
Performance |
| Timeline |
| MagnaChip Semiconductor |
| British American Tobacco |
MagnaChip Semiconductor and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MagnaChip Semiconductor and British American
The main advantage of trading using opposite MagnaChip Semiconductor and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MagnaChip Semiconductor position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| MagnaChip Semiconductor vs. Apple Inc | MagnaChip Semiconductor vs. Apple Inc | MagnaChip Semiconductor vs. Apple Inc | MagnaChip Semiconductor vs. Apple Inc |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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