Correlation Between Taiwan Semiconductor and Elite Semiconductor

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

Diversification Opportunities for Taiwan Semiconductor and Elite Semiconductor

0.27

Correlation Coefficient

Taiwan Semiconductor  Elite Semiconductor

Modest diversification

The 3 months correlation between Taiwan and Elite is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Co and Elite Semiconductor Memory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Semiconductor 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 Elite Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Semiconductor has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Elite Semiconductor go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Elite Semiconductor

Assuming the 90 days trading horizon Taiwan Semiconductor Co is expected to under-perform the Elite Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Semiconductor Co is 1.35 times less risky than Elite Semiconductor. The stock trades about 0.0 of its potential returns per unit of risk. The Elite Semiconductor Memory is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,230  in Elite Semiconductor Memory on December 28, 2024 and sell it today you would earn a total of  220.00  from holding Elite Semiconductor Memory or generate 3.53% return on investment over 90 days.

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

Taiwan Semiconductor Co  vs.  Elite Semiconductor Memory

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 fairly stable basic indicators, Taiwan Semiconductor is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Elite Semiconductor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Semiconductor Memory are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Elite Semiconductor 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 Elite Semiconductor

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

The idea behind Taiwan Semiconductor Co and Elite Semiconductor Memory 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.