Correlation Between Taiwan Semiconductor and Marathon Petroleum

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

Diversification Opportunities for Taiwan Semiconductor and Marathon Petroleum

-0.57

Correlation Coefficient

Taiwan Semiconductor  Marathon Petroleum

Excellent diversification

The 3 months correlation between Taiwan and Marathon is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Marathon Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Petroleum 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 Marathon Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Petroleum has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Marathon Petroleum go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Marathon Petroleum

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to under-perform the Marathon Petroleum. In addition to that, Taiwan Semiconductor is 2.59 times more volatile than Marathon Petroleum. It trades about -0.09 of its total potential returns per unit of risk. Marathon Petroleum is currently generating about 0.03 per unit of volatility. If you would invest  89,190  in Marathon Petroleum on December 25, 2024 and sell it today you would earn a total of  1,614  from holding Marathon Petroleum or generate 1.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Taiwan Semiconductor Manufactu  vs.  Marathon Petroleum

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.

Marathon Petroleum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marathon Petroleum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Marathon Petroleum is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Taiwan Semiconductor and Marathon Petroleum

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

The idea behind Taiwan Semiconductor Manufacturing and Marathon Petroleum 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.