Correlation Between Te Chang and WIN Semiconductors

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

By analyzing existing cross correlation between Te Chang Construction and WIN Semiconductors, you can compare the effects of market volatilities on Te Chang and WIN Semiconductors 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 Te Chang with a short position of WIN Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Te Chang and WIN Semiconductors.

Diversification Opportunities for Te Chang and WIN Semiconductors

-0.86

Correlation Coefficient

Te Chang  WIN Semiconductors

Pay attention - limited upside

The 3 months correlation between 5511 and WIN is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Te Chang Construction and WIN Semiconductors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIN Semiconductors and Te Chang 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 Te Chang Construction are associated (or correlated) with WIN Semiconductors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIN Semiconductors has no effect on the direction of Te Chang i.e., Te Chang and WIN Semiconductors go up and down completely randomly.

Pair Corralation between Te Chang and WIN Semiconductors

Assuming the 90 days trading horizon Te Chang Construction is expected to generate 0.37 times more return on investment than WIN Semiconductors. However, Te Chang Construction is 2.71 times less risky than WIN Semiconductors. It trades about 0.04 of its potential returns per unit of risk. WIN Semiconductors is currently generating about -0.14 per unit of risk. If you would invest  6,330  in Te Chang Construction on October 8, 2024 and sell it today you would earn a total of  30.00  from holding Te Chang Construction or generate 0.47% return on investment over 90 days.

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

Te Chang Construction  vs.  WIN Semiconductors

Te Chang Construction

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Te Chang Construction are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Te Chang may actually be approaching a critical reversion point that can send shares even higher in February 2025.

WIN Semiconductors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WIN Semiconductors 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.

Pair Trading with Te Chang and WIN Semiconductors

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

The idea behind Te Chang Construction and WIN Semiconductors 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.