Correlation Between Taiwan Semiconductor and Infosys

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

Diversification Opportunities for Taiwan Semiconductor and Infosys

0.84

Correlation Coefficient

Taiwan Semiconductor  Infosys

Very poor diversification

The 3 months correlation between Taiwan and Infosys is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Infosys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Limited 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 Infosys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infosys Limited has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Infosys go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Infosys

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to generate 1.92 times more return on investment than Infosys. However, Taiwan Semiconductor is 1.92 times more volatile than Infosys Limited. It trades about -0.09 of its potential returns per unit of risk. Infosys Limited is currently generating about -0.27 per unit of risk. If you would invest  15,559  in Taiwan Semiconductor Manufacturing on December 25, 2024 and sell it today you would lose (2,723) from holding Taiwan Semiconductor Manufacturing or give up 17.5% of portfolio value over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  Infosys Limited

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.

Infosys Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Infosys Limited 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 technical and fundamental 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.

Pair Trading with Taiwan Semiconductor and Infosys

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

The idea behind Taiwan Semiconductor Manufacturing and Infosys Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.