Correlation Between Taiwan Semiconductor and GX AI

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

Diversification Opportunities for Taiwan Semiconductor and GX AI

0.74

Correlation Coefficient

Taiwan Semiconductor  GX AI

Poor diversification

The 3 months correlation between Taiwan and BAIQ39 is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and GX AI TECH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GX AI TECH 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 GX AI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GX AI TECH has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and GX AI go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and GX AI

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to under-perform the GX AI. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Semiconductor Manufacturing is 1.01 times less risky than GX AI. The stock trades about -0.13 of its potential returns per unit of risk. The GX AI TECH is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  8,052  in GX AI TECH on December 29, 2024 and sell it today you would lose (1,054) from holding GX AI TECH or give up 13.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

Taiwan Semiconductor Manufactu  vs.  GX AI TECH

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 weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

GX AI TECH

Risk-Adjusted Performance

Very Weak

Over the last 90 days GX AI TECH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Taiwan Semiconductor and GX AI

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

The idea behind Taiwan Semiconductor Manufacturing and GX AI TECH 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 Commodity Directory module to find actively traded commodities issued by global exchanges.