Correlation Between Taiwan Semiconductor and Kao Fong
Can any of the company-specific risk be diversified away by investing in both Taiwan Semiconductor and Kao Fong 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 Kao Fong 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 Kao Fong Machinery, you can compare the effects of market volatilities on Taiwan Semiconductor and Kao Fong 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 Kao Fong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Semiconductor and Kao Fong.
Diversification Opportunities for Taiwan Semiconductor and Kao Fong
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Taiwan and Kao is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Kao Fong Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kao Fong Machinery 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 Kao Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kao Fong Machinery has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Kao Fong go up and down completely randomly.
Pair Corralation between Taiwan Semiconductor and Kao Fong
Assuming the 90 days trading horizon Taiwan Semiconductor is expected to generate 3.95 times less return on investment than Kao Fong. But when comparing it to its historical volatility, Taiwan Semiconductor Manufacturing is 2.04 times less risky than Kao Fong. It trades about 0.08 of its potential returns per unit of risk. Kao Fong Machinery is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,800 in Kao Fong Machinery on September 3, 2024 and sell it today you would earn a total of 2,985 from holding Kao Fong Machinery or generate 165.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Semiconductor Manufactu vs. Kao Fong Machinery
Performance |
| Timeline |
| Taiwan Semiconductor |
| Kao Fong Machinery |
Taiwan Semiconductor and Kao Fong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Semiconductor and Kao Fong
The main advantage of trading using opposite Taiwan Semiconductor and Kao Fong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Semiconductor position performs unexpectedly, Kao Fong 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 Kao Fong will offset losses from the drop in Kao Fong's long position.| Taiwan Semiconductor vs. United Microelectronics | Taiwan Semiconductor vs. Hon Hai Precision | Taiwan Semiconductor vs. MediaTek | Taiwan Semiconductor vs. Taiwan Semiconductor Manufacturing |
| Kao Fong vs. Airtac International Group | Kao Fong vs. TECO Electric Machinery | Kao Fong vs. Chung Hsin Electric Machinery | Kao Fong vs. Ruentex Development 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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