Correlation Between Four Leaf and Tower Semiconductor

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

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

Diversification Opportunities for Four Leaf and Tower Semiconductor

0.71

Correlation Coefficient

Four Leaf  Tower Semiconductor

Poor diversification

The 3 months correlation between Four and Tower is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Four Leaf Acquisition and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor and Four Leaf 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 Four Leaf Acquisition 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 Four Leaf i.e., Four Leaf and Tower Semiconductor go up and down completely randomly.

Pair Corralation between Four Leaf and Tower Semiconductor

Given the investment horizon of 90 days Four Leaf Acquisition is expected to under-perform the Tower Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Four Leaf Acquisition is 6.6 times less risky than Tower Semiconductor. The stock trades about -0.02 of its potential returns per unit of risk. The Tower Semiconductor is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,954  in Tower Semiconductor on October 11, 2024 and sell it today you would earn a total of  216.00  from holding Tower Semiconductor or generate 4.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Four Leaf Acquisition  vs.  Tower Semiconductor

Four Leaf Acquisition

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Four Leaf Acquisition are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Four Leaf is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Tower Semiconductor

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Semiconductor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Tower Semiconductor displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Four Leaf and Tower Semiconductor

The main advantage of trading using opposite Four Leaf and Tower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Four Leaf 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 Four Leaf Acquisition 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.