Correlation Between MagnaChip Semiconductor and ASE Industrial

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

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

Diversification Opportunities for MagnaChip Semiconductor and ASE Industrial

-0.63

Correlation Coefficient

MagnaChip Semiconductor  ASE Industrial

Excellent diversification

The 3 months correlation between MagnaChip and ASE is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding MagnaChip Semiconductor and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding 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 ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of MagnaChip Semiconductor i.e., MagnaChip Semiconductor and ASE Industrial go up and down completely randomly.

Pair Corralation between MagnaChip Semiconductor and ASE Industrial

Allowing for the 90-day total investment horizon MagnaChip Semiconductor is expected to under-perform the ASE Industrial. In addition to that, MagnaChip Semiconductor is 1.14 times more volatile than ASE Industrial Holding. It trades about -0.12 of its total potential returns per unit of risk. ASE Industrial Holding is currently generating about 0.11 per unit of volatility. If you would invest  801.00  in ASE Industrial Holding on February 2, 2024 and sell it today you would earn a total of  215.00  from holding ASE Industrial Holding or generate 26.84% return on investment over 90 days.

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

MagnaChip Semiconductor  vs.  ASE Industrial Holding

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

ASE Industrial Holding

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ASE Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MagnaChip Semiconductor and ASE Industrial

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

The idea behind MagnaChip Semiconductor and ASE Industrial Holding 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.