Correlation Between Taiwan Semiconductor and Long Bon

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

Diversification Opportunities for Taiwan Semiconductor and Long Bon

-0.57

Correlation Coefficient

Taiwan Semiconductor  Long Bon

Excellent diversification

The 3 months correlation between Taiwan and Long is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Long Bon International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Bon International 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 Long Bon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Bon International has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Long Bon go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Long Bon

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to under-perform the Long Bon. In addition to that, Taiwan Semiconductor is 1.18 times more volatile than Long Bon International. It trades about -0.12 of its total potential returns per unit of risk. Long Bon International is currently generating about -0.04 per unit of volatility. If you would invest  1,985  in Long Bon International on December 29, 2024 and sell it today you would lose (85.00) from holding Long Bon International or give up 4.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.25%
Values	Daily Returns

Taiwan Semiconductor Manufactu  vs.  Long Bon International

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.

Long Bon International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Long Bon International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Long Bon 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 Long Bon

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

The idea behind Taiwan Semiconductor Manufacturing and Long Bon International 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.