Correlation Between Taiwan Semiconductor and EVN AG

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

Diversification Opportunities for Taiwan Semiconductor and EVN AG

-0.34

Correlation Coefficient

Taiwan Semiconductor  EVN AG

Very good diversification

The 3 months correlation between Taiwan and EVN is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and EVN AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVN AG 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 EVN AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVN AG has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and EVN AG go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and EVN AG

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to generate 1.82 times more return on investment than EVN AG. However, Taiwan Semiconductor is 1.82 times more volatile than EVN AG. It trades about 0.07 of its potential returns per unit of risk. EVN AG is currently generating about 0.03 per unit of risk. If you would invest  8,160  in Taiwan Semiconductor Manufacturing on December 8, 2024 and sell it today you would earn a total of  8,200  from holding Taiwan Semiconductor Manufacturing or generate 100.49% return on investment over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  EVN AG

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 latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

EVN AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days EVN AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, EVN AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Taiwan Semiconductor and EVN AG

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

The idea behind Taiwan Semiconductor Manufacturing and EVN AG 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.