Correlation Between Tower Semiconductor and Nextcom

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

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

Diversification Opportunities for Tower Semiconductor and Nextcom

-0.57

Correlation Coefficient

Tower Semiconductor  Nextcom

Excellent diversification

The 3 months correlation between Tower and Nextcom is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and Nextcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextcom 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 Nextcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextcom has no effect on the direction of Tower Semiconductor i.e., Tower Semiconductor and Nextcom go up and down completely randomly.

Pair Corralation between Tower Semiconductor and Nextcom

Assuming the 90 days trading horizon Tower Semiconductor is expected to generate 1.0 times more return on investment than Nextcom. However, Tower Semiconductor is 1.0 times more volatile than Nextcom. It trades about 0.13 of its potential returns per unit of risk. Nextcom is currently generating about 0.04 per unit of risk. If you would invest  1,507,000  in Tower Semiconductor on September 4, 2024 and sell it today you would earn a total of  215,000  from holding Tower Semiconductor or generate 14.27% 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.  Nextcom

Tower Semiconductor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Semiconductor are ranked lower than 9 (%) 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.

Nextcom

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nextcom are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nextcom 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 Nextcom

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

The idea behind Tower Semiconductor and Nextcom 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.