Correlation Between CVR Energy and Taiwan Semiconductor

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

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

Diversification Opportunities for CVR Energy and Taiwan Semiconductor

-0.32

Correlation Coefficient

CVR Energy  Taiwan Semiconductor

Very good diversification

The 3 months correlation between CVR and Taiwan is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and CVR Energy 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 CVR Energy are associated (or correlated) with Taiwan Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Semiconductor has no effect on the direction of CVR Energy i.e., CVR Energy and Taiwan Semiconductor go up and down completely randomly.

Pair Corralation between CVR Energy and Taiwan Semiconductor

Assuming the 90 days trading horizon CVR Energy is expected to under-perform the Taiwan Semiconductor. In addition to that, CVR Energy is 1.65 times more volatile than Taiwan Semiconductor Manufacturing. It trades about -0.06 of its total potential returns per unit of risk. Taiwan Semiconductor Manufacturing is currently generating about 0.06 per unit of volatility. If you would invest  16,940  in Taiwan Semiconductor Manufacturing on September 2, 2024 and sell it today you would earn a total of  1,540  from holding Taiwan Semiconductor Manufacturing or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.97%
Values	Daily Returns

CVR Energy  vs.  Taiwan Semiconductor Manufactu

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Taiwan Semiconductor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Taiwan Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CVR Energy and Taiwan Semiconductor

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

The idea behind CVR Energy and Taiwan Semiconductor Manufacturing 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.