Correlation Between Taiwan Semiconductor and Expedia

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

Diversification Opportunities for Taiwan Semiconductor and Expedia

0.33

Correlation Coefficient

Taiwan Semiconductor  Expedia

Weak diversification

The 3 months correlation between Taiwan and Expedia is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Expedia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expedia Group 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 Expedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expedia Group has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Expedia go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Expedia

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to under-perform the Expedia. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Semiconductor Manufacturing is 1.25 times less risky than Expedia. The stock trades about -0.09 of its potential returns per unit of risk. The Expedia Group is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  58,552  in Expedia Group on December 25, 2024 and sell it today you would lose (7,390) from holding Expedia Group or give up 12.62% of portfolio value over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  Expedia Group

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.

Expedia Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Expedia Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental 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 Expedia

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

The idea behind Taiwan Semiconductor Manufacturing and Expedia Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.