Correlation Between Inflection Point and Tower Semiconductor

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

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

Diversification Opportunities for Inflection Point and Tower Semiconductor

0.73

Correlation Coefficient

Inflection Point  Tower Semiconductor

Poor diversification

The 3 months correlation between Inflection and Tower is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Inflection Point Acquisition and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor and Inflection Point 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 Inflection Point 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 Inflection Point i.e., Inflection Point and Tower Semiconductor go up and down completely randomly.

Pair Corralation between Inflection Point and Tower Semiconductor

Assuming the 90 days horizon Inflection Point is expected to generate 1.98 times less return on investment than Tower Semiconductor. But when comparing it to its historical volatility, Inflection Point Acquisition is 1.05 times less risky than Tower Semiconductor. It trades about 0.06 of its potential returns per unit of risk. Tower Semiconductor is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,009  in Tower Semiconductor on October 7, 2024 and sell it today you would earn a total of  2,201  from holding Tower Semiconductor or generate 73.15% return on investment over 90 days.

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

Inflection Point Acquisition  vs.  Tower Semiconductor

Inflection Point Acq

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inflection Point Acquisition are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Inflection Point unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tower Semiconductor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Semiconductor are ranked lower than 8 (%) 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 Inflection Point and Tower Semiconductor

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

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.