Correlation Between ASE Industrial and Taiwan Semiconductor
Can any of the company-specific risk be diversified away by investing in both ASE Industrial 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 ASE Industrial and Taiwan Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASE Industrial Holding and Taiwan Semiconductor Manufacturing, you can compare the effects of market volatilities on ASE Industrial 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 ASE Industrial with a short position of Taiwan Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and Taiwan Semiconductor.
Diversification Opportunities for ASE Industrial and Taiwan Semiconductor
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ASE and Taiwan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and ASE Industrial 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 ASE Industrial Holding 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 ASE Industrial i.e., ASE Industrial and Taiwan Semiconductor go up and down completely randomly.
Pair Corralation between ASE Industrial and Taiwan Semiconductor
Assuming the 90 days trading horizon ASE Industrial is expected to generate 1.94 times less return on investment than Taiwan Semiconductor. In addition to that, ASE Industrial is 1.17 times more volatile than Taiwan Semiconductor Manufacturing. It trades about 0.06 of its total potential returns per unit of risk. Taiwan Semiconductor Manufacturing is currently generating about 0.13 per unit of volatility. If you would invest 53,420 in Taiwan Semiconductor Manufacturing on September 4, 2024 and sell it today you would earn a total of 50,080 from holding Taiwan Semiconductor Manufacturing or generate 93.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASE Industrial Holding vs. Taiwan Semiconductor Manufactu
Performance |
| Timeline |
| ASE Industrial Holding |
| Taiwan Semiconductor |
ASE Industrial and Taiwan Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASE Industrial and Taiwan Semiconductor
The main advantage of trading using opposite ASE Industrial and Taiwan Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASE Industrial 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.| ASE Industrial vs. Taiwan Semiconductor Manufacturing | ASE Industrial vs. Yang Ming Marine | ASE Industrial vs. AU Optronics | ASE Industrial 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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