Correlation Between Rand Capital and Tower Semiconductor

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

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

Diversification Opportunities for Rand Capital and Tower Semiconductor

0.83

Correlation Coefficient

Rand Capital  Tower Semiconductor

Very poor diversification

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

Pair Corralation between Rand Capital and Tower Semiconductor

Given the investment horizon of 90 days Rand Capital Corp is expected to generate 1.23 times more return on investment than Tower Semiconductor. However, Rand Capital is 1.23 times more volatile than Tower Semiconductor. It trades about 0.13 of its potential returns per unit of risk. Tower Semiconductor is currently generating about 0.12 per unit of risk. If you would invest  1,012  in Rand Capital Corp on October 22, 2024 and sell it today you would earn a total of  1,156  from holding Rand Capital Corp or generate 114.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.58%
Values	Daily Returns

Rand Capital Corp  vs.  Tower Semiconductor

Rand Capital Corp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rand Capital Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rand Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tower Semiconductor

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Semiconductor are ranked lower than 7 (%) 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 Rand Capital and Tower Semiconductor

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

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.