Correlation Between Orient Semiconductor and Taiwan Speciality

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Can any of the company-specific risk be diversified away by investing in both Orient Semiconductor and Taiwan Speciality 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 Orient Semiconductor and Taiwan Speciality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orient Semiconductor Electronics and Taiwan Speciality Chemicals, you can compare the effects of market volatilities on Orient Semiconductor and Taiwan Speciality 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 Orient Semiconductor with a short position of Taiwan Speciality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orient Semiconductor and Taiwan Speciality.

Diversification Opportunities for Orient Semiconductor and Taiwan Speciality

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Orient and Taiwan is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Orient Semiconductor Electroni and Taiwan Speciality Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Speciality and Orient 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 Orient Semiconductor Electronics are associated (or correlated) with Taiwan Speciality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Speciality has no effect on the direction of Orient Semiconductor i.e., Orient Semiconductor and Taiwan Speciality go up and down completely randomly.

Pair Corralation between Orient Semiconductor and Taiwan Speciality

Assuming the 90 days trading horizon Orient Semiconductor Electronics is expected to under-perform the Taiwan Speciality. In addition to that, Orient Semiconductor is 1.95 times more volatile than Taiwan Speciality Chemicals. It trades about -0.16 of its total potential returns per unit of risk. Taiwan Speciality Chemicals is currently generating about -0.18 per unit of volatility. If you would invest  16,800  in Taiwan Speciality Chemicals on August 31, 2024 and sell it today you would lose (950.00) from holding Taiwan Speciality Chemicals or give up 5.65% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Orient Semiconductor Electroni  vs.  Taiwan Speciality Chemicals

 Performance 
       Timeline  
Orient Semiconductor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Orient Semiconductor Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.
Taiwan Speciality 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Taiwan Speciality Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Speciality is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Orient Semiconductor and Taiwan Speciality Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Orient Semiconductor and Taiwan Speciality

The main advantage of trading using opposite Orient Semiconductor and Taiwan Speciality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orient Semiconductor position performs unexpectedly, Taiwan Speciality 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 Speciality will offset losses from the drop in Taiwan Speciality's long position.
The idea behind Orient Semiconductor Electronics and Taiwan Speciality Chemicals 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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