Correlation Between Aviat Networks and MagnaChip Semiconductor

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

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

Diversification Opportunities for Aviat Networks and MagnaChip Semiconductor

-0.07

Correlation Coefficient

Aviat Networks  MagnaChip Semiconductor

Good diversification

The 3 months correlation between Aviat and MagnaChip is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Aviat Networks and MagnaChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MagnaChip Semiconductor and Aviat Networks 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 Aviat Networks 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 Aviat Networks i.e., Aviat Networks and MagnaChip Semiconductor go up and down completely randomly.

Pair Corralation between Aviat Networks and MagnaChip Semiconductor

Given the investment horizon of 90 days Aviat Networks is expected to under-perform the MagnaChip Semiconductor. In addition to that, Aviat Networks is 2.09 times more volatile than MagnaChip Semiconductor. It trades about -0.16 of its total potential returns per unit of risk. MagnaChip Semiconductor is currently generating about -0.04 per unit of volatility. If you would invest  534.00  in MagnaChip Semiconductor on February 6, 2024 and sell it today you would lose (10.00) from holding MagnaChip Semiconductor or give up 1.87% of portfolio value over 90 days.

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

Aviat Networks  vs.  MagnaChip Semiconductor

Aviat Networks

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aviat Networks are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Aviat Networks is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aviat Networks and MagnaChip Semiconductor

The main advantage of trading using opposite Aviat Networks and MagnaChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aviat Networks 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 Aviat Networks 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 Global Correlations module to find global opportunities by holding instruments from different markets.