Correlation Between Taiwan Semiconductor and Standard Chartered

Can any of the company-specific risk be diversified away by investing in both Taiwan Semiconductor and Standard Chartered 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 Standard Chartered 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 Standard Chartered PLC, you can compare the effects of market volatilities on Taiwan Semiconductor and Standard Chartered 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 Standard Chartered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Semiconductor and Standard Chartered.

Diversification Opportunities for Taiwan Semiconductor and Standard Chartered

-0.67

Correlation Coefficient

Taiwan Semiconductor  Standard Chartered

Excellent diversification

The 3 months correlation between Taiwan and Standard is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Standard Chartered PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Chartered PLC 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 Standard Chartered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Chartered PLC has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Standard Chartered go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Standard Chartered

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to under-perform the Standard Chartered. In addition to that, Taiwan Semiconductor is 1.94 times more volatile than Standard Chartered PLC. It trades about -0.08 of its total potential returns per unit of risk. Standard Chartered PLC is currently generating about 0.17 per unit of volatility. If you would invest  96,686  in Standard Chartered PLC on December 29, 2024 and sell it today you would earn a total of  17,864  from holding Standard Chartered PLC or generate 18.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Taiwan Semiconductor Manufactu  vs.  Standard Chartered PLC

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 uncertain 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.

Standard Chartered PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Chartered PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Standard Chartered unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Semiconductor and Standard Chartered

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

The idea behind Taiwan Semiconductor Manufacturing and Standard Chartered PLC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.