Correlation Between Tower Semiconductor and DATATEC

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

By analyzing existing cross correlation between Tower Semiconductor and DATATEC LTD 2, you can compare the effects of market volatilities on Tower Semiconductor and DATATEC 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 DATATEC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Semiconductor and DATATEC.

Diversification Opportunities for Tower Semiconductor and DATATEC

-0.02

Correlation Coefficient

Tower Semiconductor  DATATEC

Good diversification

The 3 months correlation between Tower and DATATEC is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and DATATEC LTD 2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATATEC LTD 2 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 DATATEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATATEC LTD 2 has no effect on the direction of Tower Semiconductor i.e., Tower Semiconductor and DATATEC go up and down completely randomly.

Pair Corralation between Tower Semiconductor and DATATEC

Assuming the 90 days horizon Tower Semiconductor is expected to under-perform the DATATEC. In addition to that, Tower Semiconductor is 1.35 times more volatile than DATATEC LTD 2. It trades about -0.17 of its total potential returns per unit of risk. DATATEC LTD 2 is currently generating about 0.08 per unit of volatility. If you would invest  444.00  in DATATEC LTD 2 on December 20, 2024 and sell it today you would earn a total of  40.00  from holding DATATEC LTD 2 or generate 9.01% return on investment over 90 days.

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

Tower Semiconductor  vs.  DATATEC LTD 2

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.

DATATEC LTD 2

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DATATEC LTD 2 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, DATATEC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tower Semiconductor and DATATEC

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

The idea behind Tower Semiconductor and DATATEC LTD 2 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.