Correlation Between NKT AS and Taiwan Semiconductor
Can any of the company-specific risk be diversified away by investing in both NKT AS 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 NKT AS and Taiwan Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NKT AS and Taiwan Semiconductor Manufacturing, you can compare the effects of market volatilities on NKT AS 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 NKT AS with a short position of Taiwan Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of NKT AS and Taiwan Semiconductor.
Diversification Opportunities for NKT AS and Taiwan Semiconductor
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NKT and Taiwan is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding NKT AS and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and NKT AS 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 NKT AS 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 NKT AS i.e., NKT AS and Taiwan Semiconductor go up and down completely randomly.
Pair Corralation between NKT AS and Taiwan Semiconductor
Assuming the 90 days horizon NKT AS is expected to under-perform the Taiwan Semiconductor. In addition to that, NKT AS is 1.07 times more volatile than Taiwan Semiconductor Manufacturing. It trades about -0.44 of its total potential returns per unit of risk. Taiwan Semiconductor Manufacturing is currently generating about 0.12 per unit of volatility. If you would invest 18,100 in Taiwan Semiconductor Manufacturing on September 12, 2024 and sell it today you would earn a total of 860.00 from holding Taiwan Semiconductor Manufacturing or generate 4.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NKT AS vs. Taiwan Semiconductor Manufactu
Performance |
| Timeline |
| NKT AS |
| Taiwan Semiconductor |
NKT AS and Taiwan Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NKT AS and Taiwan Semiconductor
The main advantage of trading using opposite NKT AS and Taiwan Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NKT AS 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.| NKT AS vs. Taiwan Semiconductor Manufacturing | NKT AS vs. Tower Semiconductor | NKT AS vs. Elmos Semiconductor SE | NKT AS vs. Meli Hotels International |
| Taiwan Semiconductor vs. Broadcom | Taiwan Semiconductor vs. Superior Plus Corp | Taiwan Semiconductor vs. SIVERS SEMICONDUCTORS AB | Taiwan Semiconductor vs. Norsk Hydro ASA |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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