Correlation Between Taiwan Semiconductor and Shinkong Insurance

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

Diversification Opportunities for Taiwan Semiconductor and Shinkong Insurance

0.79

Correlation Coefficient

Taiwan Semiconductor  Shinkong Insurance

Poor diversification

The 3 months correlation between Taiwan and Shinkong is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Shinkong Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinkong Insurance 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 Shinkong Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinkong Insurance has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Shinkong Insurance go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Shinkong Insurance

Assuming the 90 days trading horizon Taiwan Semiconductor is expected to generate 1.35 times less return on investment than Shinkong Insurance. In addition to that, Taiwan Semiconductor is 1.39 times more volatile than Shinkong Insurance Co. It trades about 0.07 of its total potential returns per unit of risk. Shinkong Insurance Co is currently generating about 0.12 per unit of volatility. If you would invest  9,320  in Shinkong Insurance Co on September 22, 2024 and sell it today you would earn a total of  880.00  from holding Shinkong Insurance Co or generate 9.44% return on investment over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  Shinkong Insurance Co

Taiwan Semiconductor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shinkong Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shinkong Insurance Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shinkong Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Taiwan Semiconductor and Shinkong Insurance

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

The idea behind Taiwan Semiconductor Manufacturing and Shinkong Insurance 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.