Correlation Between Taiwan Semiconductor and Nrg Energy

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

Diversification Opportunities for Taiwan Semiconductor and Nrg Energy

0.0

Correlation Coefficient

Taiwan Semiconductor  Nrg Energy

Pay attention - limited upside

The 3 months correlation between Taiwan and Nrg is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Nrg Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nrg Energy 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 Nrg Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nrg Energy has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Nrg Energy go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Nrg Energy

If you would invest (100.00) in Nrg Energy on December 19, 2024 and sell it today you would earn a total of  100.00  from holding Nrg Energy or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Taiwan Semiconductor Manufactu  vs.  Nrg Energy

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 unsteady 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.

Nrg Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nrg Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nrg Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Taiwan Semiconductor and Nrg Energy

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

The idea behind Taiwan Semiconductor Manufacturing and Nrg Energy 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.

Check out your portfolio center.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.