Correlation Between Taiwan Semiconductor and Tang Eng

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

By analyzing existing cross correlation between Taiwan Semiconductor Co and Tang Eng Iron, you can compare the effects of market volatilities on Taiwan Semiconductor and Tang Eng 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 Tang Eng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Semiconductor and Tang Eng.

Diversification Opportunities for Taiwan Semiconductor and Tang Eng

-0.1

Correlation Coefficient

Taiwan Semiconductor  Tang Eng

Good diversification

The 3 months correlation between Taiwan and Tang is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Co and Tang Eng Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tang Eng Iron 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 Co are associated (or correlated) with Tang Eng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tang Eng Iron has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Tang Eng go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Tang Eng

Assuming the 90 days trading horizon Taiwan Semiconductor Co is expected to under-perform the Tang Eng. In addition to that, Taiwan Semiconductor is 3.08 times more volatile than Tang Eng Iron. It trades about -0.07 of its total potential returns per unit of risk. Tang Eng Iron is currently generating about 0.06 per unit of volatility. If you would invest  3,240  in Tang Eng Iron on August 30, 2024 and sell it today you would earn a total of  80.00  from holding Tang Eng Iron or generate 2.47% return on investment over 90 days.

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

Taiwan Semiconductor Co  vs.  Tang Eng Iron

Taiwan Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Semiconductor Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Tang Eng Iron

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tang Eng Iron are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Tang Eng 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 Tang Eng

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

The idea behind Taiwan Semiconductor Co and Tang Eng Iron 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.