Correlation Between Tower Semiconductor and PROSIEBENSAT1 MEDIADR4

Can any of the company-specific risk be diversified away by investing in both Tower Semiconductor and PROSIEBENSAT1 MEDIADR4 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 PROSIEBENSAT1 MEDIADR4 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tower Semiconductor and PROSIEBENSAT1 MEDIADR4, you can compare the effects of market volatilities on Tower Semiconductor and PROSIEBENSAT1 MEDIADR4 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 PROSIEBENSAT1 MEDIADR4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Semiconductor and PROSIEBENSAT1 MEDIADR4.

Diversification Opportunities for Tower Semiconductor and PROSIEBENSAT1 MEDIADR4

-0.5

Correlation Coefficient

Tower Semiconductor  PROSIEBENSAT1 MEDIADR4

Very good diversification

The 3 months correlation between Tower and PROSIEBENSAT1 is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and PROSIEBENSAT1 MEDIADR4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PROSIEBENSAT1 MEDIADR4 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 PROSIEBENSAT1 MEDIADR4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PROSIEBENSAT1 MEDIADR4 has no effect on the direction of Tower Semiconductor i.e., Tower Semiconductor and PROSIEBENSAT1 MEDIADR4 go up and down completely randomly.

Pair Corralation between Tower Semiconductor and PROSIEBENSAT1 MEDIADR4

Assuming the 90 days horizon Tower Semiconductor is expected to generate 1.13 times more return on investment than PROSIEBENSAT1 MEDIADR4. However, Tower Semiconductor is 1.13 times more volatile than PROSIEBENSAT1 MEDIADR4. It trades about 0.13 of its potential returns per unit of risk. PROSIEBENSAT1 MEDIADR4 is currently generating about -0.08 per unit of risk. If you would invest  4,100  in Tower Semiconductor on October 26, 2024 and sell it today you would earn a total of  998.00  from holding Tower Semiconductor or generate 24.34% return on investment over 90 days.

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

Tower Semiconductor  vs.  PROSIEBENSAT1 MEDIADR4

Tower Semiconductor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Semiconductor are ranked lower than 10 (%) 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.

PROSIEBENSAT1 MEDIADR4

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PROSIEBENSAT1 MEDIADR4 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 primary indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Tower Semiconductor and PROSIEBENSAT1 MEDIADR4

The main advantage of trading using opposite Tower Semiconductor and PROSIEBENSAT1 MEDIADR4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Semiconductor position performs unexpectedly, PROSIEBENSAT1 MEDIADR4 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 PROSIEBENSAT1 MEDIADR4 will offset losses from the drop in PROSIEBENSAT1 MEDIADR4's long position.

The idea behind Tower Semiconductor and PROSIEBENSAT1 MEDIADR4 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.