Correlation Between Taiwan Semiconductor and KIMBALL ELECTRONICS

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

By analyzing existing cross correlation between Taiwan Semiconductor Manufacturing and KIMBALL ELECTRONICS, you can compare the effects of market volatilities on Taiwan Semiconductor and KIMBALL ELECTRONICS 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 Taiwan Semiconductor with a short position of KIMBALL ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Semiconductor and KIMBALL ELECTRONICS.

Diversification Opportunities for Taiwan Semiconductor and KIMBALL ELECTRONICS

0.71

Correlation Coefficient

Taiwan Semiconductor  KIMBALL ELECTRONICS

Poor diversification

The 3 months correlation between Taiwan and KIMBALL is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and KIMBALL ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIMBALL ELECTRONICS and Taiwan 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 Taiwan Semiconductor Manufacturing are associated (or correlated) with KIMBALL ELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIMBALL ELECTRONICS has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and KIMBALL ELECTRONICS go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and KIMBALL ELECTRONICS

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to under-perform the KIMBALL ELECTRONICS. In addition to that, Taiwan Semiconductor is 1.51 times more volatile than KIMBALL ELECTRONICS. It trades about -0.07 of its total potential returns per unit of risk. KIMBALL ELECTRONICS is currently generating about -0.08 per unit of volatility. If you would invest  1,730  in KIMBALL ELECTRONICS on December 20, 2024 and sell it today you would lose (190.00) from holding KIMBALL ELECTRONICS or give up 10.98% of portfolio value over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  KIMBALL ELECTRONICS

Taiwan Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Taiwan Semiconductor Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental 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.

KIMBALL ELECTRONICS

Risk-Adjusted Performance

Very Weak

Over the last 90 days KIMBALL ELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Taiwan Semiconductor and KIMBALL ELECTRONICS

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

The idea behind Taiwan Semiconductor Manufacturing and KIMBALL ELECTRONICS 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.