Correlation Between Taiwan Semiconductor and Handa Pharmaceuticals

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

Diversification Opportunities for Taiwan Semiconductor and Handa Pharmaceuticals

-0.54

Correlation Coefficient

Taiwan Semiconductor  Handa Pharmaceuticals

Excellent diversification

The 3 months correlation between Taiwan and Handa is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Co and Handa Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Handa Pharmaceuticals 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 Handa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Handa Pharmaceuticals has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Handa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Handa Pharmaceuticals

Assuming the 90 days trading horizon Taiwan Semiconductor Co is expected to under-perform the Handa Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Semiconductor Co is 1.55 times less risky than Handa Pharmaceuticals. The stock trades about -0.03 of its potential returns per unit of risk. The Handa Pharmaceuticals is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  14,030  in Handa Pharmaceuticals on October 26, 2024 and sell it today you would lose (6,140) from holding Handa Pharmaceuticals or give up 43.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Taiwan Semiconductor Co  vs.  Handa Pharmaceuticals

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Handa Pharmaceuticals

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Taiwan Semiconductor and Handa Pharmaceuticals

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

The idea behind Taiwan Semiconductor Co and Handa Pharmaceuticals 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.