Correlation Between TELES Informationstech and Tower Semiconductor

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

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

Diversification Opportunities for TELES Informationstech and Tower Semiconductor

-0.59

Correlation Coefficient

TELES Informationstech  Tower Semiconductor

Excellent diversification

The 3 months correlation between TELES and Tower is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding TELES Informationstechnologien and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor and TELES Informationstech 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 TELES Informationstechnologien AG 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 TELES Informationstech i.e., TELES Informationstech and Tower Semiconductor go up and down completely randomly.

Pair Corralation between TELES Informationstech and Tower Semiconductor

Assuming the 90 days trading horizon TELES Informationstechnologien AG is expected to under-perform the Tower Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, TELES Informationstechnologien AG is 1.31 times less risky than Tower Semiconductor. The stock trades about -0.15 of its potential returns per unit of risk. The Tower Semiconductor is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,935  in Tower Semiconductor on August 31, 2024 and sell it today you would earn a total of  591.00  from holding Tower Semiconductor or generate 15.02% return on investment over 90 days.

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

TELES Informationstechnologien  vs.  Tower Semiconductor

TELES Informationstech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TELES Informationstechnologien AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Tower Semiconductor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Semiconductor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tower Semiconductor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TELES Informationstech and Tower Semiconductor

The main advantage of trading using opposite TELES Informationstech and Tower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TELES Informationstech 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 TELES Informationstechnologien AG 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.