Correlation Between SPORT LISBOA and Magnachip Semiconductor

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

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

Diversification Opportunities for SPORT LISBOA and Magnachip Semiconductor

0.73

Correlation Coefficient

SPORT LISBOA  Magnachip Semiconductor

Poor diversification

The 3 months correlation between SPORT and Magnachip is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding SPORT LISBOA E and Magnachip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnachip Semiconductor and SPORT LISBOA 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 SPORT LISBOA E 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 SPORT LISBOA i.e., SPORT LISBOA and Magnachip Semiconductor go up and down completely randomly.

Pair Corralation between SPORT LISBOA and Magnachip Semiconductor

Assuming the 90 days horizon SPORT LISBOA E is expected to generate 1.28 times more return on investment than Magnachip Semiconductor. However, SPORT LISBOA is 1.28 times more volatile than Magnachip Semiconductor. It trades about 0.17 of its potential returns per unit of risk. Magnachip Semiconductor is currently generating about 0.14 per unit of risk. If you would invest  368.00  in SPORT LISBOA E on April 24, 2025 and sell it today you would earn a total of  176.00  from holding SPORT LISBOA E or generate 47.83% return on investment over 90 days.

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

SPORT LISBOA E  vs.  Magnachip Semiconductor

SPORT LISBOA E

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPORT LISBOA E are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SPORT LISBOA reported solid returns over the last few months and may actually be approaching a breakup point.

Magnachip Semiconductor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnachip Semiconductor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Magnachip Semiconductor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPORT LISBOA and Magnachip Semiconductor

The main advantage of trading using opposite SPORT LISBOA and Magnachip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPORT LISBOA 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 SPORT LISBOA E 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.