Correlation Between Monks Investment and Taiwan Semiconductor

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

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

Diversification Opportunities for Monks Investment and Taiwan Semiconductor

0.76

Correlation Coefficient

Monks Investment  Taiwan Semiconductor

Poor diversification

The 3 months correlation between Monks and Taiwan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and Monks Investment 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 Monks Investment Trust 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 Monks Investment i.e., Monks Investment and Taiwan Semiconductor go up and down completely randomly.

Pair Corralation between Monks Investment and Taiwan Semiconductor

Assuming the 90 days trading horizon Monks Investment Trust is expected to generate 0.42 times more return on investment than Taiwan Semiconductor. However, Monks Investment Trust is 2.4 times less risky than Taiwan Semiconductor. It trades about -0.06 of its potential returns per unit of risk. Taiwan Semiconductor Manufacturing is currently generating about -0.07 per unit of risk. If you would invest  126,800  in Monks Investment Trust on December 24, 2024 and sell it today you would lose (6,800) from holding Monks Investment Trust or give up 5.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Monks Investment Trust  vs.  Taiwan Semiconductor Manufactu

Monks Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monks Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Monks Investment is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the 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 uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Monks Investment and Taiwan Semiconductor

The main advantage of trading using opposite Monks Investment and Taiwan Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monks Investment 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 Monks Investment Trust 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.