Correlation Between Saia and Tower Semiconductor
Can any of the company-specific risk be diversified away by investing in both Saia 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 Saia and Tower Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Saia Inc and Tower Semiconductor, you can compare the effects of market volatilities on Saia 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 Saia with a short position of Tower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saia and Tower Semiconductor.
Diversification Opportunities for Saia and Tower Semiconductor
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Saia and Tower is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Saia Inc and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor and Saia 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 Saia Inc 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 Saia i.e., Saia and Tower Semiconductor go up and down completely randomly.
Pair Corralation between Saia and Tower Semiconductor
Given the investment horizon of 90 days Saia is expected to generate 1.28 times less return on investment than Tower Semiconductor. In addition to that, Saia is 1.47 times more volatile than Tower Semiconductor. It trades about 0.06 of its total potential returns per unit of risk. Tower Semiconductor is currently generating about 0.11 per unit of volatility. If you would invest 2,909 in Tower Semiconductor on September 4, 2024 and sell it today you would earn a total of 1,986 from holding Tower Semiconductor or generate 68.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Saia Inc vs. Tower Semiconductor
Performance |
| Timeline |
| Saia Inc |
| Tower Semiconductor |
Saia and Tower Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Saia and Tower Semiconductor
The main advantage of trading using opposite Saia and Tower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Saia 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.The idea behind Saia Inc and Tower Semiconductor pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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