Correlation Between MagnaChip Semiconductor and MaxLinear

Can any of the company-specific risk be diversified away by investing in both MagnaChip Semiconductor and MaxLinear 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 MaxLinear into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MagnaChip Semiconductor and MaxLinear, you can compare the effects of market volatilities on MagnaChip Semiconductor and MaxLinear 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 MaxLinear. Check out your portfolio center. Please also check ongoing floating volatility patterns of MagnaChip Semiconductor and MaxLinear.

Diversification Opportunities for MagnaChip Semiconductor and MaxLinear

-0.08

Correlation Coefficient

MagnaChip Semiconductor  MaxLinear

Good diversification

The 3 months correlation between MagnaChip and MaxLinear is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and MaxLinear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MaxLinear 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 MaxLinear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MaxLinear has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and MaxLinear go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and MaxLinear

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to under-perform the MaxLinear. But the stock apears to be less risky and, when comparing its historical volatility, MagnaChip Semiconductor is 1.27 times less risky than MaxLinear. The stock trades about -0.18 of its potential returns per unit of risk. The MaxLinear is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,214  in MaxLinear on January 26, 2024 and sell it today you would lose (121.00) from holding MaxLinear or give up 5.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

MagnaChip Semiconductor  vs.  MaxLinear

MagnaChip Semiconductor

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

MaxLinear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MaxLinear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, MaxLinear is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with MagnaChip Semiconductor and MaxLinear

The main advantage of trading using opposite MagnaChip Semiconductor and MaxLinear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MagnaChip Semiconductor position performs unexpectedly, MaxLinear 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 MaxLinear will offset losses from the drop in MaxLinear's long position.

The idea behind MagnaChip Semiconductor and MaxLinear 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 Anywhere module to track or share privately all of your investments from the convenience of any device.