Correlation Between Taiwan Semiconductor and Air Products
Can any of the company-specific risk be diversified away by investing in both Taiwan Semiconductor and Air Products 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 Air Products 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 Air Products Chemicals, you can compare the effects of market volatilities on Taiwan Semiconductor and Air Products 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 Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Semiconductor and Air Products.
Diversification Opportunities for Taiwan Semiconductor and Air Products
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Taiwan and Air is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Air Products Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products Chemicals 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products Chemicals has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Air Products go up and down completely randomly.
Pair Corralation between Taiwan Semiconductor and Air Products
Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to under-perform the Air Products. In addition to that, Taiwan Semiconductor is 2.25 times more volatile than Air Products Chemicals. It trades about -0.1 of its total potential returns per unit of risk. Air Products Chemicals is currently generating about 0.23 per unit of volatility. If you would invest 31,616 in Air Products Chemicals on August 28, 2024 and sell it today you would earn a total of 1,875 from holding Air Products Chemicals or generate 5.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Semiconductor Manufactu vs. Air Products Chemicals
Performance |
| Timeline |
| Taiwan Semiconductor |
| Air Products Chemicals |
Taiwan Semiconductor and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Semiconductor and Air Products
The main advantage of trading using opposite Taiwan Semiconductor and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Semiconductor position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.| Taiwan Semiconductor vs. Samsung Electronics Co | Taiwan Semiconductor vs. Samsung Electronics Co | Taiwan Semiconductor vs. Hyundai Motor | Taiwan Semiconductor vs. Toyota Motor Corp |
| Air Products vs. Impax Environmental Markets | Air Products vs. JD Sports Fashion | Air Products vs. Seche Environnement SA | Air Products vs. Lowland Investment Co |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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