Correlation Between Taiwan Semiconductor and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Taiwan Semiconductor and IPG Photonics 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 Taiwan Semiconductor and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Semiconductor Manufacturing and IPG Photonics, you can compare the effects of market volatilities on Taiwan Semiconductor and IPG Photonics 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 Taiwan Semiconductor with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Semiconductor and IPG Photonics.
Diversification Opportunities for Taiwan Semiconductor and IPG Photonics
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Taiwan and IPG is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Taiwan 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 Taiwan Semiconductor Manufacturing are associated (or correlated) with IPG Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPG Photonics has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and IPG Photonics go up and down completely randomly.
Pair Corralation between Taiwan Semiconductor and IPG Photonics
Assuming the 90 days horizon Taiwan Semiconductor Manufacturing is expected to generate 1.57 times more return on investment than IPG Photonics. However, Taiwan Semiconductor is 1.57 times more volatile than IPG Photonics. It trades about 0.14 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.02 per unit of risk. If you would invest 336.00 in Taiwan Semiconductor Manufacturing on November 2, 2024 and sell it today you would earn a total of 1,388 from holding Taiwan Semiconductor Manufacturing or generate 413.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 73.08% |
| Values | Daily Returns |
Taiwan Semiconductor Manufactu vs. IPG Photonics
Performance |
| Timeline |
| Taiwan Semiconductor |
| IPG Photonics |
Taiwan Semiconductor and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Semiconductor and IPG Photonics
The main advantage of trading using opposite Taiwan Semiconductor and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Semiconductor position performs unexpectedly, IPG Photonics 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 IPG Photonics will offset losses from the drop in IPG Photonics' long position.| Taiwan Semiconductor vs. Avis Budget Group | Taiwan Semiconductor vs. Playtech plc | Taiwan Semiconductor vs. Triton International Limited | Taiwan Semiconductor vs. Academy Sports Outdoors |
| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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