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 Printed, 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

0.17

Correlation Coefficient

Taiwan Semiconductor  Nan Ya

Average diversification

The 3 months correlation between Taiwan and Nan is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Nan Ya Printed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nan Ya Printed 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 Printed 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 1.7 times less risky than Nan Ya. The stock trades about -0.12 of its potential returns per unit of risk. The Nan Ya Printed is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  12,250  in Nan Ya Printed on December 29, 2024 and sell it today you would lose (1,050) from holding Nan Ya Printed or give up 8.57% of portfolio value over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  Nan Ya Printed

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 Printed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nan Ya Printed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal 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 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 Printed 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.