Correlation Between Capital Securities and Taiwan Semiconductor

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

By analyzing existing cross correlation between Capital Securities Corp and Taiwan Semiconductor Manufacturing, you can compare the effects of market volatilities on Capital Securities and Taiwan 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 Capital Securities with a short position of Taiwan Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Securities and Taiwan Semiconductor.

Diversification Opportunities for Capital Securities and Taiwan Semiconductor

0.65

Correlation Coefficient

Capital Securities  Taiwan Semiconductor

Poor diversification

The 3 months correlation between Capital and Taiwan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Capital Securities Corp and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and Capital Securities 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 Capital Securities Corp are associated (or correlated) with Taiwan Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Semiconductor has no effect on the direction of Capital Securities i.e., Capital Securities and Taiwan Semiconductor go up and down completely randomly.

Pair Corralation between Capital Securities and Taiwan Semiconductor

Assuming the 90 days trading horizon Capital Securities Corp is expected to generate 0.75 times more return on investment than Taiwan Semiconductor. However, Capital Securities Corp is 1.34 times less risky than Taiwan Semiconductor. It trades about 0.27 of its potential returns per unit of risk. Taiwan Semiconductor Manufacturing is currently generating about 0.09 per unit of risk. If you would invest  2,230  in Capital Securities Corp on October 1, 2024 and sell it today you would earn a total of  335.00  from holding Capital Securities Corp or generate 15.02% return on investment over 90 days.

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

Capital Securities Corp  vs.  Taiwan Semiconductor Manufactu

Capital Securities Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Securities Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Capital Securities showed solid returns over the last few months and may actually be approaching a breakup point.

Taiwan Semiconductor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Capital Securities and Taiwan Semiconductor

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

The idea behind Capital Securities Corp and Taiwan Semiconductor Manufacturing 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.