Correlation Between Taiwan Semiconductor and Amgen

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

Diversification Opportunities for Taiwan Semiconductor and Amgen

-0.73

Correlation Coefficient

Taiwan Semiconductor  Amgen

Pay attention - limited upside

The 3 months correlation between Taiwan and Amgen is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc 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 Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Amgen go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Amgen

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to under-perform the Amgen. In addition to that, Taiwan Semiconductor is 1.66 times more volatile than Amgen Inc. It trades about -0.1 of its total potential returns per unit of risk. Amgen Inc is currently generating about 0.19 per unit of volatility. If you would invest  528,827  in Amgen Inc on December 30, 2024 and sell it today you would earn a total of  114,173  from holding Amgen Inc or generate 21.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Taiwan Semiconductor Manufactu  vs.  Amgen Inc

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. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly 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.

Amgen Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Amgen showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Semiconductor and Amgen

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

The idea behind Taiwan Semiconductor Manufacturing and Amgen Inc 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..