Correlation Between Taiwan Semiconductor and Nan Ya

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

Diversification Opportunities for Taiwan Semiconductor and Nan Ya

-0.48

Correlation Coefficient

Taiwan Semiconductor  Nan Ya

Very good diversification

The 3 months correlation between Taiwan and Nan is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Nan Ya Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nan Ya Plastics 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 Nan Ya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nan Ya Plastics has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Nan Ya go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Nan Ya

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to under-perform the Nan Ya. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Semiconductor Manufacturing is 1.44 times less risky than Nan Ya. The stock trades about -0.12 of its potential returns per unit of risk. The Nan Ya Plastics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,010  in Nan Ya Plastics on December 29, 2024 and sell it today you would earn a total of  90.00  from holding Nan Ya Plastics or generate 2.99% return on investment over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  Nan Ya Plastics

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. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Nan Ya Plastics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nan Ya Plastics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Nan Ya is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Taiwan Semiconductor and Nan Ya

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

The idea behind Taiwan Semiconductor Manufacturing and Nan Ya Plastics 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.