Correlation Between MagnaChip Semiconductor and MACOM Technology

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

Diversification Opportunities for MagnaChip Semiconductor and MACOM Technology

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between MagnaChip and MACOM is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and MACOM Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACOM Technology Sol 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 MACOM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACOM Technology Sol has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and MACOM Technology go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and MACOM Technology

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to under-perform the MACOM Technology. In addition to that, MagnaChip Semiconductor is 1.48 times more volatile than MACOM Technology Solutions. It trades about -0.17 of its total potential returns per unit of risk. MACOM Technology Solutions is currently generating about 0.2 per unit of volatility. If you would invest  8,582  in MACOM Technology Solutions on December 29, 2023 and sell it today you would earn a total of  972.00  from holding MACOM Technology Solutions or generate 11.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

MagnaChip Semiconductor  vs.  MACOM Technology Solutions

 Performance 
       Timeline  
MagnaChip Semiconductor 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days MagnaChip Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
MACOM Technology Sol 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in MACOM Technology Solutions are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, MACOM Technology is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

MagnaChip Semiconductor and MACOM Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MagnaChip Semiconductor and MACOM Technology

The main advantage of trading using opposite MagnaChip Semiconductor and MACOM Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MagnaChip Semiconductor position performs unexpectedly, MACOM Technology 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 MACOM Technology will offset losses from the drop in MACOM Technology's long position.
The idea behind MagnaChip Semiconductor and MACOM Technology Solutions 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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