Correlation Between Taiwan Semiconductor and Maxeon Solar

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

Diversification Opportunities for Taiwan Semiconductor and Maxeon Solar

-0.36

Correlation Coefficient

Taiwan Semiconductor  Maxeon Solar

Very good diversification

The 3 months correlation between Taiwan and Maxeon is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Maxeon Solar Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxeon Solar Technologies 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 Maxeon Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxeon Solar Technologies has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Maxeon Solar go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Maxeon Solar

Considering the 90-day investment horizon Taiwan Semiconductor Manufacturing is expected to generate 0.23 times more return on investment than Maxeon Solar. However, Taiwan Semiconductor Manufacturing is 4.31 times less risky than Maxeon Solar. It trades about 0.11 of its potential returns per unit of risk. Maxeon Solar Technologies is currently generating about -0.01 per unit of risk. If you would invest  17,353  in Taiwan Semiconductor Manufacturing on September 20, 2024 and sell it today you would earn a total of  2,713  from holding Taiwan Semiconductor Manufacturing or generate 15.63% 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.  Maxeon Solar Technologies

Taiwan Semiconductor

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Taiwan Semiconductor displayed solid returns over the last few months and may actually be approaching a breakup point.

Maxeon Solar Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maxeon Solar Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Taiwan Semiconductor and Maxeon Solar

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

The idea behind Taiwan Semiconductor Manufacturing and Maxeon Solar Technologies 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.