Correlation Between Tower Semiconductor and Pinterest

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

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

Diversification Opportunities for Tower Semiconductor and Pinterest

-0.55

Correlation Coefficient

Tower Semiconductor  Pinterest

Excellent diversification

The 3 months correlation between Tower and Pinterest is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and Pinterest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinterest 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 Pinterest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinterest has no effect on the direction of Tower Semiconductor i.e., Tower Semiconductor and Pinterest go up and down completely randomly.

Pair Corralation between Tower Semiconductor and Pinterest

Given the investment horizon of 90 days Tower Semiconductor is expected to generate 1.02 times less return on investment than Pinterest. But when comparing it to its historical volatility, Tower Semiconductor is 1.33 times less risky than Pinterest. It trades about 0.03 of its potential returns per unit of risk. Pinterest is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,644  in Pinterest on October 3, 2024 and sell it today you would earn a total of  271.00  from holding Pinterest or generate 10.25% 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.  Pinterest

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. In spite of very inconsistent technical and fundamental indicators, Tower Semiconductor displayed solid returns over the last few months and may actually be approaching a breakup point.

Pinterest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pinterest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Tower Semiconductor and Pinterest

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

The idea behind Tower Semiconductor and Pinterest 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.