Correlation Between Taiwan Semiconductor and StShine Optical

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

Diversification Opportunities for Taiwan Semiconductor and StShine Optical

-0.69

Correlation Coefficient

Taiwan Semiconductor  StShine Optical

Excellent diversification

The 3 months correlation between Taiwan and StShine is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and StShine Optical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StShine Optical 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 StShine Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StShine Optical has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and StShine Optical go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and StShine Optical

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to generate 1.13 times more return on investment than StShine Optical. However, Taiwan Semiconductor is 1.13 times more volatile than StShine Optical Co. It trades about 0.14 of its potential returns per unit of risk. StShine Optical Co is currently generating about -0.09 per unit of risk. If you would invest  108,000  in Taiwan Semiconductor Manufacturing on October 24, 2024 and sell it today you would earn a total of  5,500  from holding Taiwan Semiconductor Manufacturing or generate 5.09% return on investment over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  StShine Optical Co

Taiwan Semiconductor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Semiconductor may actually be approaching a critical reversion point that can send shares even higher in February 2025.

StShine Optical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days StShine Optical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Taiwan Semiconductor and StShine Optical

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

The idea behind Taiwan Semiconductor Manufacturing and StShine Optical Co 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.