Correlation Between MagnaChip Semiconductor and United Natural
Can any of the company-specific risk be diversified away by investing in both MagnaChip Semiconductor and United Natural 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 United Natural 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 United Natural Foods, you can compare the effects of market volatilities on MagnaChip Semiconductor and United Natural 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 United Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of MagnaChip Semiconductor and United Natural.
Diversification Opportunities for MagnaChip Semiconductor and United Natural
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MagnaChip and United is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor Corp and United Natural Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural Foods 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 United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and United Natural go up and down completely randomly.
Pair Corralation between MagnaChip Semiconductor and United Natural
Assuming the 90 days trading horizon MagnaChip Semiconductor Corp is expected to under-perform the United Natural. But the stock apears to be less risky and, when comparing its historical volatility, MagnaChip Semiconductor Corp is 1.48 times less risky than United Natural. The stock trades about -0.05 of its potential returns per unit of risk. The United Natural Foods is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,397 in United Natural Foods on September 2, 2024 and sell it today you would earn a total of 893.00 from holding United Natural Foods or generate 63.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MagnaChip Semiconductor Corp vs. United Natural Foods
Performance |
| Timeline |
| MagnaChip Semiconductor |
| United Natural Foods |
MagnaChip Semiconductor and United Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MagnaChip Semiconductor and United Natural
The main advantage of trading using opposite MagnaChip Semiconductor and United Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MagnaChip Semiconductor position performs unexpectedly, United Natural 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 United Natural will offset losses from the drop in United Natural's long position.The idea behind MagnaChip Semiconductor Corp and United Natural Foods 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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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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