Correlation Between Chin Poon and Taiwan Semiconductor

Can any of the company-specific risk be diversified away by investing in both Chin Poon and Taiwan Semiconductor 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 Chin Poon and Taiwan Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chin Poon Industrial Co and Taiwan Semiconductor Manufacturing, you can compare the effects of market volatilities on Chin Poon and Taiwan Semiconductor 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 Chin Poon with a short position of Taiwan Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chin Poon and Taiwan Semiconductor.

Diversification Opportunities for Chin Poon and Taiwan Semiconductor

-0.56

Correlation Coefficient

Chin Poon  Taiwan Semiconductor

Excellent diversification

The 3 months correlation between Chin and Taiwan is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Chin Poon Industrial Co and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and Chin Poon 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 Chin Poon Industrial Co are associated (or correlated) with Taiwan Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Semiconductor has no effect on the direction of Chin Poon i.e., Chin Poon and Taiwan Semiconductor go up and down completely randomly.

Pair Corralation between Chin Poon and Taiwan Semiconductor

Assuming the 90 days trading horizon Chin Poon Industrial Co is expected to under-perform the Taiwan Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Chin Poon Industrial Co is 1.21 times less risky than Taiwan Semiconductor. The stock trades about -0.06 of its potential returns per unit of risk. The Taiwan Semiconductor Manufacturing is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  88,505  in Taiwan Semiconductor Manufacturing on September 4, 2024 and sell it today you would earn a total of  14,995  from holding Taiwan Semiconductor Manufacturing or generate 16.94% return on investment over 90 days.

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

Chin Poon Industrial Co  vs.  Taiwan Semiconductor Manufactu

Chin Poon Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Taiwan Semiconductor

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Semiconductor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chin Poon and Taiwan Semiconductor

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

The idea behind Chin Poon Industrial Co and Taiwan Semiconductor Manufacturing 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.