Correlation Between Tower Semiconductor and Utron
Can any of the company-specific risk be diversified away by investing in both Tower Semiconductor and Utron 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 Utron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tower Semiconductor and Utron, you can compare the effects of market volatilities on Tower Semiconductor and Utron 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 Utron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Semiconductor and Utron.
Diversification Opportunities for Tower Semiconductor and Utron
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tower and Utron is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and Utron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utron 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 Utron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utron has no effect on the direction of Tower Semiconductor i.e., Tower Semiconductor and Utron go up and down completely randomly.
Pair Corralation between Tower Semiconductor and Utron
Assuming the 90 days trading horizon Tower Semiconductor is expected to generate 1.99 times more return on investment than Utron. However, Tower Semiconductor is 1.99 times more volatile than Utron. It trades about 0.15 of its potential returns per unit of risk. Utron is currently generating about 0.05 per unit of risk. If you would invest 1,555,000 in Tower Semiconductor on September 3, 2024 and sell it today you would earn a total of 130,000 from holding Tower Semiconductor or generate 8.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tower Semiconductor vs. Utron
Performance |
| Timeline |
| Tower Semiconductor |
| Utron |
Tower Semiconductor and Utron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tower Semiconductor and Utron
The main advantage of trading using opposite Tower Semiconductor and Utron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Semiconductor position performs unexpectedly, Utron 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 Utron will offset losses from the drop in Utron's long position.| Tower Semiconductor vs. Teva Pharmaceutical Industries | Tower Semiconductor vs. Elbit Systems | Tower Semiconductor vs. Nice | Tower Semiconductor vs. Bezeq Israeli Telecommunication |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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