Correlation Between Taiwan Semiconductor and Holtek Semiconductor

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

Diversification Opportunities for Taiwan Semiconductor and Holtek Semiconductor

0.44

Correlation Coefficient

Taiwan Semiconductor  Holtek Semiconductor

Very weak diversification

The 3 months correlation between Taiwan and Holtek is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Co and Holtek Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holtek 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 Holtek Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holtek Semiconductor has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Holtek Semiconductor go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Holtek Semiconductor

Assuming the 90 days trading horizon Taiwan Semiconductor Co is expected to under-perform the Holtek Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Semiconductor Co is 1.31 times less risky than Holtek Semiconductor. The stock trades about -0.06 of its potential returns per unit of risk. The Holtek Semiconductor is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,730  in Holtek Semiconductor on September 15, 2024 and sell it today you would earn a total of  40.00  from holding Holtek Semiconductor or generate 0.85% return on investment over 90 days.

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

Taiwan Semiconductor Co  vs.  Holtek Semiconductor

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.

Holtek Semiconductor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Holtek Semiconductor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Holtek 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 Holtek Semiconductor

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

The idea behind Taiwan Semiconductor Co and Holtek Semiconductor 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.