Correlation Between Elmos Semiconductor and Taiwan Semiconductor

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

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

Diversification Opportunities for Elmos Semiconductor and Taiwan Semiconductor

0.74

Correlation Coefficient

Elmos Semiconductor  Taiwan Semiconductor

Poor diversification

The 3 months correlation between Elmos and Taiwan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Elmos Semiconductor SE and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and Elmos 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 Elmos Semiconductor SE 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 Elmos Semiconductor i.e., Elmos Semiconductor and Taiwan Semiconductor go up and down completely randomly.

Pair Corralation between Elmos Semiconductor and Taiwan Semiconductor

Assuming the 90 days trading horizon Elmos Semiconductor SE is expected to generate 0.91 times more return on investment than Taiwan Semiconductor. However, Elmos Semiconductor SE is 1.1 times less risky than Taiwan Semiconductor. It trades about -0.05 of its potential returns per unit of risk. Taiwan Semiconductor Manufacturing is currently generating about -0.1 per unit of risk. If you would invest  6,800  in Elmos Semiconductor SE on December 30, 2024 and sell it today you would lose (770.00) from holding Elmos Semiconductor SE or give up 11.32% of portfolio value over 90 days.

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

Elmos Semiconductor SE  vs.  Taiwan Semiconductor Manufactu

Elmos Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elmos Semiconductor SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Taiwan Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Taiwan Semiconductor Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Elmos Semiconductor and Taiwan Semiconductor

The main advantage of trading using opposite Elmos Semiconductor and Taiwan Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elmos Semiconductor 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 Elmos Semiconductor SE 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.