Correlation Between Tower Semiconductor and CITIC

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

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

Diversification Opportunities for Tower Semiconductor and CITIC

-0.65

Correlation Coefficient

Tower Semiconductor  CITIC

Excellent diversification

The 3 months correlation between Tower and CITIC is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited and Tower Semiconductor 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 Tower Semiconductor are associated (or correlated) with CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Limited has no effect on the direction of Tower Semiconductor i.e., Tower Semiconductor and CITIC go up and down completely randomly.

Pair Corralation between Tower Semiconductor and CITIC

Assuming the 90 days horizon Tower Semiconductor is expected to under-perform the CITIC. In addition to that, Tower Semiconductor is 1.25 times more volatile than CITIC Limited. It trades about -0.18 of its total potential returns per unit of risk. CITIC Limited is currently generating about 0.11 per unit of volatility. If you would invest  106.00  in CITIC Limited on December 20, 2024 and sell it today you would earn a total of  14.00  from holding CITIC Limited or generate 13.21% return on investment over 90 days.

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

Tower Semiconductor  vs.  CITIC Limited

Tower Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tower Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CITIC Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, CITIC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tower Semiconductor and CITIC

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

The idea behind Tower Semiconductor and CITIC Limited 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.