Correlation Between Optimax Technology and Taiwan Semiconductor

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

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

Diversification Opportunities for Optimax Technology and Taiwan Semiconductor

0.56

Correlation Coefficient

Optimax Technology  Taiwan Semiconductor

Very weak diversification

The 3 months correlation between Optimax and Taiwan is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Optimax Technology Corp and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and Optimax Technology 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 Optimax Technology Corp 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 Optimax Technology i.e., Optimax Technology and Taiwan Semiconductor go up and down completely randomly.

Pair Corralation between Optimax Technology and Taiwan Semiconductor

Assuming the 90 days trading horizon Optimax Technology is expected to generate 3.03 times less return on investment than Taiwan Semiconductor. In addition to that, Optimax Technology is 1.14 times more volatile than Taiwan Semiconductor Manufacturing. It trades about 0.05 of its total potential returns per unit of risk. Taiwan Semiconductor Manufacturing is currently generating about 0.17 per unit of volatility. If you would invest  89,501  in Taiwan Semiconductor Manufacturing on September 9, 2024 and sell it today you would earn a total of  16,999  from holding Taiwan Semiconductor Manufacturing or generate 18.99% return on investment over 90 days.

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

Optimax Technology Corp  vs.  Taiwan Semiconductor Manufactu

Optimax Technology Corp

Risk-Adjusted Performance

0 of 100

Insignificant

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

Taiwan Semiconductor

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 13 (%) 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 Optimax Technology and Taiwan Semiconductor

The main advantage of trading using opposite Optimax Technology and Taiwan Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optimax Technology 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 Optimax Technology Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.