Correlation Between Taiwan Semiconductor and Sun Life

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

Diversification Opportunities for Taiwan Semiconductor and Sun Life

0.58

Correlation Coefficient

Taiwan Semiconductor  Sun Life

Very weak diversification

The 3 months correlation between Taiwan and Sun is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Sun Life Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Life Financial 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 Sun Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Life Financial has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Sun Life go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Sun Life

Considering the 90-day investment horizon Taiwan Semiconductor Manufacturing is expected to under-perform the Sun Life. In addition to that, Taiwan Semiconductor is 2.41 times more volatile than Sun Life Financial. It trades about -0.07 of its total potential returns per unit of risk. Sun Life Financial is currently generating about -0.05 per unit of volatility. If you would invest  5,863  in Sun Life Financial on December 23, 2024 and sell it today you would lose (243.00) from holding Sun Life Financial or give up 4.14% 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.  Sun Life Financial

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.

Sun Life Financial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Taiwan Semiconductor and Sun Life

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

The idea behind Taiwan Semiconductor Manufacturing and Sun Life Financial 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.