Correlation Between Taiwan Semiconductor and Chinese Maritime

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

By analyzing existing cross correlation between Taiwan Semiconductor Co and Chinese Maritime Transport, you can compare the effects of market volatilities on Taiwan Semiconductor and Chinese Maritime 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 Chinese Maritime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Semiconductor and Chinese Maritime.

Diversification Opportunities for Taiwan Semiconductor and Chinese Maritime

0.09

Correlation Coefficient

Taiwan Semiconductor  Chinese Maritime

Significant diversification

The 3 months correlation between Taiwan and Chinese is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Co and Chinese Maritime Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Maritime Tra 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 Co are associated (or correlated) with Chinese Maritime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Maritime Tra has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Chinese Maritime go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Chinese Maritime

Assuming the 90 days trading horizon Taiwan Semiconductor Co is expected to under-perform the Chinese Maritime. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Semiconductor Co is 1.14 times less risky than Chinese Maritime. The stock trades about -0.06 of its potential returns per unit of risk. The Chinese Maritime Transport is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,085  in Chinese Maritime Transport on December 31, 2024 and sell it today you would earn a total of  540.00  from holding Chinese Maritime Transport or generate 13.22% return on investment over 90 days.

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

Taiwan Semiconductor Co  vs.  Chinese Maritime Transport

Taiwan Semiconductor

Risk-Adjusted Performance

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.

Chinese Maritime Tra

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chinese Maritime Transport are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chinese Maritime showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Semiconductor and Chinese Maritime

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

The idea behind Taiwan Semiconductor Co and Chinese Maritime Transport 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.