Correlation Between Tower Semiconductor and Bayside Land

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

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

Diversification Opportunities for Tower Semiconductor and Bayside Land

-0.54

Correlation Coefficient

Tower Semiconductor  Bayside Land

Excellent diversification

The 3 months correlation between Tower and Bayside is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and Bayside Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayside Land 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 Bayside Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayside Land has no effect on the direction of Tower Semiconductor i.e., Tower Semiconductor and Bayside Land go up and down completely randomly.

Pair Corralation between Tower Semiconductor and Bayside Land

Assuming the 90 days trading horizon Tower Semiconductor is expected to under-perform the Bayside Land. In addition to that, Tower Semiconductor is 1.51 times more volatile than Bayside Land. It trades about -0.03 of its total potential returns per unit of risk. Bayside Land is currently generating about 0.4 per unit of volatility. If you would invest  286,000  in Bayside Land on October 27, 2024 and sell it today you would earn a total of  17,500  from holding Bayside Land or generate 6.12% 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.  Bayside Land

Tower Semiconductor

Risk-Adjusted Performance

8 of 100

OK

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

Bayside Land

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bayside Land are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bayside Land is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tower Semiconductor and Bayside Land

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

The idea behind Tower Semiconductor and Bayside Land 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.