Correlation Between Taiwan Semiconductor and Silergy Corp

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

Diversification Opportunities for Taiwan Semiconductor and Silergy Corp

0.65

Correlation Coefficient

Taiwan Semiconductor  Silergy Corp

Poor diversification

The 3 months correlation between Taiwan and Silergy is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Silergy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silergy Corp 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 Silergy Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silergy Corp has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Silergy Corp go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Silergy Corp

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to generate 0.57 times more return on investment than Silergy Corp. However, Taiwan Semiconductor Manufacturing is 1.74 times less risky than Silergy Corp. It trades about 0.06 of its potential returns per unit of risk. Silergy Corp is currently generating about -0.01 per unit of risk. If you would invest  94,379  in Taiwan Semiconductor Manufacturing on August 31, 2024 and sell it today you would earn a total of  6,121  from holding Taiwan Semiconductor Manufacturing or generate 6.49% 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.  Silergy Corp

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 December 2024.

Silergy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silergy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Silergy Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Taiwan Semiconductor and Silergy Corp

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

The idea behind Taiwan Semiconductor Manufacturing and Silergy Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.