Correlation Between Wah Lee and Taiwan Semiconductor
Can any of the company-specific risk be diversified away by investing in both Wah Lee 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 Wah Lee and Taiwan Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wah Lee Industrial and Taiwan Semiconductor Manufacturing, you can compare the effects of market volatilities on Wah Lee 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 Wah Lee with a short position of Taiwan Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wah Lee and Taiwan Semiconductor.
Diversification Opportunities for Wah Lee and Taiwan Semiconductor
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wah and Taiwan is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Wah Lee Industrial and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and Wah Lee 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 Wah Lee Industrial 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 Wah Lee i.e., Wah Lee and Taiwan Semiconductor go up and down completely randomly.
Pair Corralation between Wah Lee and Taiwan Semiconductor
Assuming the 90 days trading horizon Wah Lee is expected to generate 2.08 times less return on investment than Taiwan Semiconductor. But when comparing it to its historical volatility, Wah Lee Industrial is 1.04 times less risky than Taiwan Semiconductor. It trades about 0.05 of its potential returns per unit of risk. Taiwan Semiconductor Manufacturing is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 46,187 in Taiwan Semiconductor Manufacturing on September 4, 2024 and sell it today you would earn a total of 57,313 from holding Taiwan Semiconductor Manufacturing or generate 124.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Wah Lee Industrial vs. Taiwan Semiconductor Manufactu
Performance |
| Timeline |
| Wah Lee Industrial |
| Taiwan Semiconductor |
Wah Lee and Taiwan Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wah Lee and Taiwan Semiconductor
The main advantage of trading using opposite Wah Lee and Taiwan Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wah Lee 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.| Wah Lee vs. Taiwan Semiconductor Manufacturing | Wah Lee vs. Yang Ming Marine | Wah Lee vs. AU Optronics | Wah Lee vs. Innolux Corp |
| Taiwan Semiconductor vs. United Microelectronics | Taiwan Semiconductor vs. Hon Hai Precision | Taiwan Semiconductor vs. MediaTek | Taiwan Semiconductor vs. Taiwan Semiconductor Manufacturing |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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