Correlation Between Sinopower Semiconductor and Taiwan Speciality

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

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

Diversification Opportunities for Sinopower Semiconductor and Taiwan Speciality

0.57

Correlation Coefficient

Sinopower Semiconductor  Taiwan Speciality

Very weak diversification

The 3 months correlation between Sinopower and Taiwan is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sinopower Semiconductor and Taiwan Speciality Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Speciality and Sinopower 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 Sinopower Semiconductor are associated (or correlated) with Taiwan Speciality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Speciality has no effect on the direction of Sinopower Semiconductor i.e., Sinopower Semiconductor and Taiwan Speciality go up and down completely randomly.

Pair Corralation between Sinopower Semiconductor and Taiwan Speciality

Assuming the 90 days trading horizon Sinopower Semiconductor is expected to generate 2.3 times less return on investment than Taiwan Speciality. But when comparing it to its historical volatility, Sinopower Semiconductor is 1.34 times less risky than Taiwan Speciality. It trades about 0.1 of its potential returns per unit of risk. Taiwan Speciality Chemicals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  16,150  in Taiwan Speciality Chemicals on September 28, 2024 and sell it today you would earn a total of  1,200  from holding Taiwan Speciality Chemicals or generate 7.43% return on investment over 90 days.

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

Sinopower Semiconductor  vs.  Taiwan Speciality Chemicals

Sinopower Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinopower Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sinopower Semiconductor is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Taiwan Speciality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Speciality Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Speciality 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 Sinopower Semiconductor and Taiwan Speciality

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

The idea behind Sinopower Semiconductor and Taiwan Speciality Chemicals 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.