Correlation Between Taiwan Semiconductor and Samsung Electronics

Can any of the company-specific risk be diversified away by investing in both Taiwan Semiconductor and Samsung Electronics 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 Samsung Electronics 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 Samsung Electronics Co, you can compare the effects of market volatilities on Taiwan Semiconductor and Samsung Electronics 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 Samsung Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Semiconductor and Samsung Electronics.

Diversification Opportunities for Taiwan Semiconductor and Samsung Electronics

-0.73

Correlation Coefficient

Taiwan Semiconductor  Samsung Electronics

Pay attention - limited upside

The 3 months correlation between Taiwan and Samsung is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics 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 Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Samsung Electronics go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Samsung Electronics

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to generate 1.25 times more return on investment than Samsung Electronics. However, Taiwan Semiconductor is 1.25 times more volatile than Samsung Electronics Co. It trades about 0.06 of its potential returns per unit of risk. Samsung Electronics Co is currently generating about -0.19 per unit of risk. If you would invest  16,940  in Taiwan Semiconductor Manufacturing on September 2, 2024 and sell it today you would earn a total of  1,540  from holding Taiwan Semiconductor Manufacturing or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Taiwan Semiconductor Manufactu  vs.  Samsung Electronics Co

Taiwan Semiconductor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Taiwan Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Samsung Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Taiwan Semiconductor and Samsung Electronics

The main advantage of trading using opposite Taiwan Semiconductor and Samsung Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Semiconductor position performs unexpectedly, Samsung Electronics 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 Samsung Electronics will offset losses from the drop in Samsung Electronics' long position.

The idea behind Taiwan Semiconductor Manufacturing and Samsung Electronics Co 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.