Correlation Between Pinterest and Taiwan Semiconductor

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

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

Diversification Opportunities for Pinterest and Taiwan Semiconductor

-0.1

Correlation Coefficient

Pinterest  Taiwan Semiconductor

Good diversification

The 3 months correlation between Pinterest and Taiwan is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Pinterest and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and Pinterest 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 Pinterest 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 Pinterest i.e., Pinterest and Taiwan Semiconductor go up and down completely randomly.

Pair Corralation between Pinterest and Taiwan Semiconductor

Given the investment horizon of 90 days Pinterest is expected to generate 1.17 times more return on investment than Taiwan Semiconductor. However, Pinterest is 1.17 times more volatile than Taiwan Semiconductor Manufacturing. It trades about 0.06 of its potential returns per unit of risk. Taiwan Semiconductor Manufacturing is currently generating about -0.08 per unit of risk. If you would invest  2,915  in Pinterest on December 29, 2024 and sell it today you would earn a total of  309.00  from holding Pinterest or generate 10.6% return on investment over 90 days.

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

Pinterest  vs.  Taiwan Semiconductor Manufactu

Pinterest

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pinterest are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Pinterest unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Pinterest and Taiwan Semiconductor

The main advantage of trading using opposite Pinterest and Taiwan Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinterest 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 Pinterest 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..