Correlation Between FREEPORT and Taiwan Semiconductor

Can any of the company-specific risk be diversified away by investing in both FREEPORT and Taiwan Semiconductor 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 FREEPORT and Taiwan Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FREEPORT MCMORAN INC 4375 and Taiwan Semiconductor Manufacturing, you can compare the effects of market volatilities on FREEPORT and Taiwan Semiconductor 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 FREEPORT with a short position of Taiwan Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of FREEPORT and Taiwan Semiconductor.

Diversification Opportunities for FREEPORT and Taiwan Semiconductor

-0.59

Correlation Coefficient

FREEPORT  Taiwan Semiconductor

Excellent diversification

The 3 months correlation between FREEPORT and Taiwan is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding FREEPORT MCMORAN INC 4375 and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and FREEPORT 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 FREEPORT MCMORAN INC 4375 are associated (or correlated) with Taiwan Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Semiconductor has no effect on the direction of FREEPORT i.e., FREEPORT and Taiwan Semiconductor go up and down completely randomly.

Pair Corralation between FREEPORT and Taiwan Semiconductor

Assuming the 90 days trading horizon FREEPORT MCMORAN INC 4375 is expected to under-perform the Taiwan Semiconductor. But the bond apears to be less risky and, when comparing its historical volatility, FREEPORT MCMORAN INC 4375 is 1.98 times less risky than Taiwan Semiconductor. The bond trades about -0.23 of its potential returns per unit of risk. The Taiwan Semiconductor Manufacturing is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  18,689  in Taiwan Semiconductor Manufacturing on September 19, 2024 and sell it today you would earn a total of  1,377  from holding Taiwan Semiconductor Manufacturing or generate 7.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

FREEPORT MCMORAN INC 4375  vs.  Taiwan Semiconductor Manufactu

FREEPORT MCMORAN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FREEPORT MCMORAN INC 4375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for FREEPORT MCMORAN INC 4375 investors.

Taiwan Semiconductor

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Taiwan Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with FREEPORT and Taiwan Semiconductor

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

The idea behind FREEPORT MCMORAN INC 4375 and Taiwan Semiconductor Manufacturing 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 CEOs Directory module to screen CEOs from public companies around the world.