Correlation Between BE Semiconductor and Magnachip Semiconductor

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

By analyzing existing cross correlation between BE Semiconductor Industries and Magnachip Semiconductor, you can compare the effects of market volatilities on BE Semiconductor and Magnachip Semiconductor 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 BE Semiconductor with a short position of Magnachip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of BE Semiconductor and Magnachip Semiconductor.

Diversification Opportunities for BE Semiconductor and Magnachip Semiconductor

0.82

Correlation Coefficient

BE Semiconductor  Magnachip Semiconductor

Very poor diversification

The 3 months correlation between BSI and Magnachip is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BE Semiconductor Industries and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and BE 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 BE Semiconductor Industries are associated (or correlated) with Magnachip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnachip Semiconductor has no effect on the direction of BE Semiconductor i.e., BE Semiconductor and Magnachip Semiconductor go up and down completely randomly.

Pair Corralation between BE Semiconductor and Magnachip Semiconductor

Assuming the 90 days trading horizon BE Semiconductor Industries is expected to generate 0.94 times more return on investment than Magnachip Semiconductor. However, BE Semiconductor Industries is 1.07 times less risky than Magnachip Semiconductor. It trades about 0.15 of its potential returns per unit of risk. Magnachip Semiconductor is currently generating about 0.05 per unit of risk. If you would invest  9,521  in BE Semiconductor Industries on March 31, 2025 and sell it today you would earn a total of  3,534  from holding BE Semiconductor Industries or generate 37.12% return on investment over 90 days.

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

BE Semiconductor Industries  vs.  Magnachip Semiconductor

BE Semiconductor Ind

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BE Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Magnachip Semiconductor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magnachip Semiconductor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Magnachip Semiconductor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BE Semiconductor and Magnachip Semiconductor

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

The idea behind BE Semiconductor Industries and Magnachip Semiconductor 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.