Correlation Between Taiwan Semiconductor and China Metal
Can any of the company-specific risk be diversified away by investing in both Taiwan Semiconductor and China Metal 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 China Metal 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 China Metal Products, you can compare the effects of market volatilities on Taiwan Semiconductor and China Metal 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 China Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Semiconductor and China Metal.
Diversification Opportunities for Taiwan Semiconductor and China Metal
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Taiwan and China is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and China Metal Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Metal Products 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 China Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Metal Products has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and China Metal go up and down completely randomly.
Pair Corralation between Taiwan Semiconductor and China Metal
Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to generate 0.72 times more return on investment than China Metal. However, Taiwan Semiconductor Manufacturing is 1.39 times less risky than China Metal. It trades about -0.06 of its potential returns per unit of risk. China Metal Products is currently generating about -0.18 per unit of risk. If you would invest 105,000 in Taiwan Semiconductor Manufacturing on August 28, 2024 and sell it today you would lose (2,000) from holding Taiwan Semiconductor Manufacturing or give up 1.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Semiconductor Manufactu vs. China Metal Products
Performance |
| Timeline |
| Taiwan Semiconductor |
| China Metal Products |
Taiwan Semiconductor and China Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Semiconductor and China Metal
The main advantage of trading using opposite Taiwan Semiconductor and China Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Semiconductor position performs unexpectedly, China Metal 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 China Metal will offset losses from the drop in China Metal's long position.| Taiwan Semiconductor vs. United Microelectronics | Taiwan Semiconductor vs. Hon Hai Precision | Taiwan Semiconductor vs. MediaTek | Taiwan Semiconductor vs. Taiwan Semiconductor Manufacturing |
| China Metal vs. Basso Industry Corp | China Metal vs. Chung Hsin Electric Machinery | China Metal vs. TYC Brother Industrial | China Metal vs. TECO Electric Machinery |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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