Correlation Between Atlantic American and Tower Semiconductor

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

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

Diversification Opportunities for Atlantic American and Tower Semiconductor

-0.77

Correlation Coefficient

Atlantic American  Tower Semiconductor

Pay attention - limited upside

The 3 months correlation between Atlantic and Tower is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Atlantic American and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor and Atlantic American 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 Atlantic American are associated (or correlated) with Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of Atlantic American i.e., Atlantic American and Tower Semiconductor go up and down completely randomly.

Pair Corralation between Atlantic American and Tower Semiconductor

Given the investment horizon of 90 days Atlantic American is expected to under-perform the Tower Semiconductor. In addition to that, Atlantic American is 1.6 times more volatile than Tower Semiconductor. It trades about -0.02 of its total potential returns per unit of risk. Tower Semiconductor is currently generating about 0.03 per unit of volatility. If you would invest  4,331  in Tower Semiconductor on October 14, 2024 and sell it today you would earn a total of  760.00  from holding Tower Semiconductor or generate 17.55% return on investment over 90 days.

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

Atlantic American  vs.  Tower Semiconductor

Atlantic American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlantic American has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Tower Semiconductor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Semiconductor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Tower Semiconductor may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Atlantic American and Tower Semiconductor

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

The idea behind Atlantic American and Tower 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.