Correlation Between Annaly Capital and Taiwan Semiconductor

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

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

Diversification Opportunities for Annaly Capital and Taiwan Semiconductor

-0.83

Correlation Coefficient

Annaly Capital  Taiwan Semiconductor

Pay attention - limited upside

The 3 months correlation between Annaly and Taiwan is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management, and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and Annaly Capital 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 Annaly Capital Management, 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 Annaly Capital i.e., Annaly Capital and Taiwan Semiconductor go up and down completely randomly.

Pair Corralation between Annaly Capital and Taiwan Semiconductor

Assuming the 90 days trading horizon Annaly Capital Management, is expected to generate 0.45 times more return on investment than Taiwan Semiconductor. However, Annaly Capital Management, is 2.2 times less risky than Taiwan Semiconductor. It trades about 0.12 of its potential returns per unit of risk. Taiwan Semiconductor Manufacturing is currently generating about -0.09 per unit of risk. If you would invest  11,327  in Annaly Capital Management, on December 24, 2024 and sell it today you would earn a total of  1,048  from holding Annaly Capital Management, or generate 9.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.67%
Values	Daily Returns

Annaly Capital Management,  vs.  Taiwan Semiconductor Manufactu

Annaly Capital Manag

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Annaly Capital Management, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Annaly Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Annaly Capital and Taiwan Semiconductor

The main advantage of trading using opposite Annaly Capital and Taiwan Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Annaly Capital 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 Annaly Capital Management, 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..