Correlation Between Taiwan Semiconductor and ELMOS SEMICONDUCTOR

Can any of the company-specific risk be diversified away by investing in both Taiwan Semiconductor and ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR, you can compare the effects of market volatilities on Taiwan Semiconductor and ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Semiconductor and ELMOS SEMICONDUCTOR.

Diversification Opportunities for Taiwan Semiconductor and ELMOS SEMICONDUCTOR

0.64

Correlation Coefficient

Taiwan Semiconductor  ELMOS SEMICONDUCTOR

Poor diversification

The 3 months correlation between Taiwan and ELMOS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and ELMOS SEMICONDUCTOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELMOS SEMICONDUCTOR has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and ELMOS SEMICONDUCTOR go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and ELMOS SEMICONDUCTOR

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to under-perform the ELMOS SEMICONDUCTOR. In addition to that, Taiwan Semiconductor is 1.08 times more volatile than ELMOS SEMICONDUCTOR. It trades about -0.1 of its total potential returns per unit of risk. ELMOS SEMICONDUCTOR is currently generating about 0.0 per unit of volatility. If you would invest  6,790  in ELMOS SEMICONDUCTOR on December 22, 2024 and sell it today you would lose (190.00) from holding ELMOS SEMICONDUCTOR or give up 2.8% 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.  ELMOS SEMICONDUCTOR

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 fragile 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.

ELMOS SEMICONDUCTOR

Risk-Adjusted Performance

Very Weak

Over the last 90 days ELMOS SEMICONDUCTOR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ELMOS SEMICONDUCTOR is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Taiwan Semiconductor and ELMOS SEMICONDUCTOR

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

The idea behind Taiwan Semiconductor Manufacturing and ELMOS SEMICONDUCTOR 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.