Correlation Between Taiwan Semiconductor and Entegris

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

Diversification Opportunities for Taiwan Semiconductor and Entegris

0.59

Correlation Coefficient

Taiwan Semiconductor  Entegris

Very weak diversification

The 3 months correlation between Taiwan and Entegris is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Entegris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entegris 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 Entegris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entegris has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Entegris go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Entegris

Considering the 90-day investment horizon Taiwan Semiconductor Manufacturing is expected to under-perform the Entegris. In addition to that, Taiwan Semiconductor is 1.24 times more volatile than Entegris. It trades about -0.08 of its total potential returns per unit of risk. Entegris is currently generating about -0.06 per unit of volatility. If you would invest  9,944  in Entegris on December 28, 2024 and sell it today you would lose (1,070) from holding Entegris or give up 10.76% of portfolio value over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  Entegris

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. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Entegris

Risk-Adjusted Performance

Very Weak

Over the last 90 days Entegris has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating 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 Entegris

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

The idea behind Taiwan Semiconductor Manufacturing and Entegris 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.