Correlation Between Taiwan Semiconductor and Premier African

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

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

Diversification Opportunities for Taiwan Semiconductor and Premier African

0.55

Correlation Coefficient

Taiwan Semiconductor  Premier African

Very weak diversification

The 3 months correlation between Taiwan and Premier is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Premier African Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier African Minerals and Taiwan 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 Taiwan Semiconductor Manufacturing are associated (or correlated) with Premier African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier African Minerals has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Premier African go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Premier African

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to generate 0.4 times more return on investment than Premier African. However, Taiwan Semiconductor Manufacturing is 2.5 times less risky than Premier African. It trades about -0.07 of its potential returns per unit of risk. Premier African Minerals is currently generating about -0.27 per unit of risk. If you would invest  20,400  in Taiwan Semiconductor Manufacturing on December 23, 2024 and sell it today you would lose (2,990) from holding Taiwan Semiconductor Manufacturing or give up 14.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Taiwan Semiconductor Manufactu  vs.  Premier African Minerals

Taiwan Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Taiwan Semiconductor Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Premier African Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premier African Minerals 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Taiwan Semiconductor and Premier African

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

The idea behind Taiwan Semiconductor Manufacturing and Premier African Minerals 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.