Correlation Between HF SINCLAIR and Taiwan Semiconductor

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

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

Diversification Opportunities for HF SINCLAIR and Taiwan Semiconductor

-0.52

Correlation Coefficient

HF SINCLAIR  Taiwan Semiconductor

Excellent diversification

The 3 months correlation between HL80 and Taiwan is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding HF SINCLAIR P and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and HF SINCLAIR 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 HF SINCLAIR P 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 HF SINCLAIR i.e., HF SINCLAIR and Taiwan Semiconductor go up and down completely randomly.

Pair Corralation between HF SINCLAIR and Taiwan Semiconductor

Assuming the 90 days trading horizon HF SINCLAIR P is expected to under-perform the Taiwan Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, HF SINCLAIR P is 1.28 times less risky than Taiwan Semiconductor. The stock trades about -0.03 of its potential returns per unit of risk. The Taiwan Semiconductor Manufacturing is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  9,046  in Taiwan Semiconductor Manufacturing on September 2, 2024 and sell it today you would earn a total of  8,534  from holding Taiwan Semiconductor Manufacturing or generate 94.34% return on investment over 90 days.

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

HF SINCLAIR P  vs.  Taiwan Semiconductor Manufactu

HF SINCLAIR P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HF SINCLAIR P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Taiwan Semiconductor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Taiwan Semiconductor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HF SINCLAIR and Taiwan Semiconductor

The main advantage of trading using opposite HF SINCLAIR and Taiwan Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HF SINCLAIR 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 HF SINCLAIR P 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.