Correlation Between Taiwan Semiconductor and Companhia Siderrgica

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

Diversification Opportunities for Taiwan Semiconductor and Companhia Siderrgica

-0.4

Correlation Coefficient

Taiwan Semiconductor  Companhia Siderrgica

Very good diversification

The 3 months correlation between Taiwan and Companhia is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Companhia Siderrgica Nacional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Siderrgica 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 Companhia Siderrgica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Siderrgica has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Companhia Siderrgica go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Companhia Siderrgica

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to generate 0.97 times more return on investment than Companhia Siderrgica. However, Taiwan Semiconductor Manufacturing is 1.03 times less risky than Companhia Siderrgica. It trades about -0.04 of its potential returns per unit of risk. Companhia Siderrgica Nacional is currently generating about -0.12 per unit of risk. If you would invest  14,779  in Taiwan Semiconductor Manufacturing on December 2, 2024 and sell it today you would lose (1,545) from holding Taiwan Semiconductor Manufacturing or give up 10.45% of portfolio value over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  Companhia Siderrgica Nacional

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 latest uncertain performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Companhia Siderrgica

Risk-Adjusted Performance

Very Weak

Over the last 90 days Companhia Siderrgica Nacional 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 comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Taiwan Semiconductor and Companhia Siderrgica

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

The idea behind Taiwan Semiconductor Manufacturing and Companhia Siderrgica Nacional 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.