Correlation Between ASE Industrial and Tower Semiconductor
Can any of the company-specific risk be diversified away by investing in both ASE Industrial and Tower 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 Tower 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 Tower Semiconductor, you can compare the effects of market volatilities on ASE Industrial and Tower 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 Tower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and Tower Semiconductor.
Diversification Opportunities for ASE Industrial and Tower Semiconductor
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ASE and Tower is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower 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 Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of ASE Industrial i.e., ASE Industrial and Tower Semiconductor go up and down completely randomly.
Pair Corralation between ASE Industrial and Tower Semiconductor
Considering the 90-day investment horizon ASE Industrial Holding is expected to generate 1.05 times more return on investment than Tower Semiconductor. However, ASE Industrial is 1.05 times more volatile than Tower Semiconductor. It trades about 0.06 of its potential returns per unit of risk. Tower Semiconductor is currently generating about 0.01 per unit of risk. If you would invest 601.00 in ASE Industrial Holding on September 4, 2024 and sell it today you would earn a total of 400.00 from holding ASE Industrial Holding or generate 66.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASE Industrial Holding vs. Tower Semiconductor
Performance |
| Timeline |
| ASE Industrial Holding |
| Tower Semiconductor |
ASE Industrial and Tower Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASE Industrial and Tower Semiconductor
The main advantage of trading using opposite ASE Industrial and Tower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASE Industrial position performs unexpectedly, Tower 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 Tower Semiconductor will offset losses from the drop in Tower Semiconductor's long position.| ASE Industrial vs. United Microelectronics | ASE Industrial vs. Amkor Technology | ASE Industrial vs. Himax Technologies | ASE Industrial vs. Chunghwa Telecom Co |
| Tower Semiconductor vs. Nova | Tower Semiconductor vs. AudioCodes | Tower Semiconductor vs. Nice Ltd ADR | Tower Semiconductor vs. Elbit Systems |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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