Correlation Between Tower Semiconductor and KENNAMETAL INC
Can any of the company-specific risk be diversified away by investing in both Tower Semiconductor and KENNAMETAL INC 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 Tower Semiconductor and KENNAMETAL INC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tower Semiconductor and KENNAMETAL INC, you can compare the effects of market volatilities on Tower Semiconductor and KENNAMETAL INC 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 Tower Semiconductor with a short position of KENNAMETAL INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Semiconductor and KENNAMETAL INC.
Diversification Opportunities for Tower Semiconductor and KENNAMETAL INC
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tower and KENNAMETAL is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and KENNAMETAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KENNAMETAL INC and Tower Semiconductor 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 Tower Semiconductor are associated (or correlated) with KENNAMETAL INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KENNAMETAL INC has no effect on the direction of Tower Semiconductor i.e., Tower Semiconductor and KENNAMETAL INC go up and down completely randomly.
Pair Corralation between Tower Semiconductor and KENNAMETAL INC
Assuming the 90 days horizon Tower Semiconductor is expected to generate 1.37 times more return on investment than KENNAMETAL INC. However, Tower Semiconductor is 1.37 times more volatile than KENNAMETAL INC. It trades about 0.1 of its potential returns per unit of risk. KENNAMETAL INC is currently generating about 0.04 per unit of risk. If you would invest 2,518 in Tower Semiconductor on September 14, 2024 and sell it today you would earn a total of 2,121 from holding Tower Semiconductor or generate 84.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tower Semiconductor vs. KENNAMETAL INC
Performance |
| Timeline |
| Tower Semiconductor |
| KENNAMETAL INC |
Tower Semiconductor and KENNAMETAL INC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tower Semiconductor and KENNAMETAL INC
The main advantage of trading using opposite Tower Semiconductor and KENNAMETAL INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Semiconductor position performs unexpectedly, KENNAMETAL INC 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 KENNAMETAL INC will offset losses from the drop in KENNAMETAL INC's long position.| Tower Semiconductor vs. Taiwan Semiconductor Manufacturing | Tower Semiconductor vs. Broadcom | Tower Semiconductor vs. Superior Plus Corp | Tower Semiconductor vs. SIVERS SEMICONDUCTORS AB |
| KENNAMETAL INC vs. ELMOS SEMICONDUCTOR | KENNAMETAL INC vs. National Storage Affiliates | KENNAMETAL INC vs. Tower Semiconductor | KENNAMETAL INC vs. Elmos Semiconductor SE |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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