Correlation Between Sabre Insurance and Taiwan Semiconductor

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

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

Diversification Opportunities for Sabre Insurance and Taiwan Semiconductor

0.75

Correlation Coefficient

Sabre Insurance  Taiwan Semiconductor

Poor diversification

The 3 months correlation between Sabre and Taiwan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sabre Insurance Group and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and Sabre Insurance 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 Sabre Insurance Group 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 Sabre Insurance i.e., Sabre Insurance and Taiwan Semiconductor go up and down completely randomly.

Pair Corralation between Sabre Insurance and Taiwan Semiconductor

Assuming the 90 days trading horizon Sabre Insurance Group is expected to generate 0.45 times more return on investment than Taiwan Semiconductor. However, Sabre Insurance Group is 2.21 times less risky than Taiwan Semiconductor. It trades about -0.1 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  13,800  in Sabre Insurance Group on December 30, 2024 and sell it today you would lose (1,260) from holding Sabre Insurance Group or give up 9.13% of portfolio value over 90 days.

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

Sabre Insurance Group  vs.  Taiwan Semiconductor Manufactu

Sabre Insurance Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sabre Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm 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 unsteady 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 Sabre Insurance and Taiwan Semiconductor

The main advantage of trading using opposite Sabre Insurance and Taiwan Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabre Insurance 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 Sabre Insurance Group 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.