Correlation Between Timken and Globalfoundries

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

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

Diversification Opportunities for Timken and Globalfoundries

-0.21

Correlation Coefficient

Timken  Globalfoundries

Very good diversification

The 3 months correlation between Timken and Globalfoundries is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries and Timken 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 Timken Company are associated (or correlated) with Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of Timken i.e., Timken and Globalfoundries go up and down completely randomly.

Pair Corralation between Timken and Globalfoundries

Considering the 90-day investment horizon Timken Company is expected to generate 0.65 times more return on investment than Globalfoundries. However, Timken Company is 1.53 times less risky than Globalfoundries. It trades about -0.01 of its potential returns per unit of risk. Globalfoundries is currently generating about -0.04 per unit of risk. If you would invest  8,442  in Timken Company on December 4, 2024 and sell it today you would lose (679.00) from holding Timken Company or give up 8.04% of portfolio value over 90 days.

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

Timken Company  vs.  Globalfoundries

Timken Company

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Timken Company are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Timken is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Globalfoundries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globalfoundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Timken and Globalfoundries

The main advantage of trading using opposite Timken and Globalfoundries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timken position performs unexpectedly, Globalfoundries 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 Globalfoundries will offset losses from the drop in Globalfoundries' long position.

The idea behind Timken Company and Globalfoundries 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..