Correlation Between Taiwan Semiconductor and KB Financial

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

Diversification Opportunities for Taiwan Semiconductor and KB Financial

0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between Taiwan and K1BF34 is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and KB Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Financial 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 KB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB Financial Group has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and KB Financial go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and KB Financial

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to generate 1.09 times more return on investment than KB Financial. However, Taiwan Semiconductor is 1.09 times more volatile than KB Financial Group. It trades about 0.15 of its potential returns per unit of risk. KB Financial Group is currently generating about -0.08 per unit of risk. If you would invest  13,935  in Taiwan Semiconductor Manufacturing on October 6, 2024 and sell it today you would earn a total of  1,983  from holding Taiwan Semiconductor Manufacturing or generate 14.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Taiwan Semiconductor Manufactu  vs.  KB Financial Group

 Performance 
       Timeline  
Taiwan Semiconductor 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Taiwan Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.
KB Financial Group 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in KB Financial Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, KB Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Taiwan Semiconductor and KB Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Taiwan Semiconductor and KB Financial

The main advantage of trading using opposite Taiwan Semiconductor and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Semiconductor position performs unexpectedly, KB Financial 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 KB Financial will offset losses from the drop in KB Financial's long position.
The idea behind Taiwan Semiconductor Manufacturing and KB Financial 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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