Correlation Between Elite Semiconductor and Taiwan Semiconductor

Can any of the company-specific risk be diversified away by investing in both Elite Semiconductor and Taiwan Semiconductor 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 Elite Semiconductor and Taiwan Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elite Semiconductor Memory and Taiwan Semiconductor Co, you can compare the effects of market volatilities on Elite Semiconductor and Taiwan Semiconductor 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 Elite Semiconductor with a short position of Taiwan Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Semiconductor and Taiwan Semiconductor.

Diversification Opportunities for Elite Semiconductor and Taiwan Semiconductor

0.71

Correlation Coefficient

Elite Semiconductor  Taiwan Semiconductor

Poor diversification

The 3 months correlation between Elite and Taiwan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Elite Semiconductor Memory and Taiwan Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and Elite 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 Elite Semiconductor Memory are associated (or correlated) with Taiwan Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Semiconductor has no effect on the direction of Elite Semiconductor i.e., Elite Semiconductor and Taiwan Semiconductor go up and down completely randomly.

Pair Corralation between Elite Semiconductor and Taiwan Semiconductor

Assuming the 90 days trading horizon Elite Semiconductor Memory is expected to under-perform the Taiwan Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Elite Semiconductor Memory is 1.17 times less risky than Taiwan Semiconductor. The stock trades about -0.13 of its potential returns per unit of risk. The Taiwan Semiconductor Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  6,280  in Taiwan Semiconductor Co on September 16, 2024 and sell it today you would lose (510.00) from holding Taiwan Semiconductor Co or give up 8.12% of portfolio value over 90 days.

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

Elite Semiconductor Memory  vs.  Taiwan Semiconductor Co

Elite Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elite Semiconductor Memory 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Taiwan Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Semiconductor Co 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 Elite Semiconductor and Taiwan Semiconductor

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

The idea behind Elite Semiconductor Memory and Taiwan Semiconductor 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.