Correlation Between G III and Tower Semiconductor

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

By analyzing existing cross correlation between G III Apparel Group and Tower Semiconductor, you can compare the effects of market volatilities on G III and Tower 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 G III with a short position of Tower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of G III and Tower Semiconductor.

Diversification Opportunities for G III and Tower Semiconductor

0.31

Correlation Coefficient

G III  Tower Semiconductor

Weak diversification

The 3 months correlation between GI4 and Tower is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding G III Apparel Group and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor and G III 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 G III Apparel Group are associated (or correlated) with Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of G III i.e., G III and Tower Semiconductor go up and down completely randomly.

Pair Corralation between G III and Tower Semiconductor

Assuming the 90 days trading horizon G III Apparel Group is expected to generate 1.13 times more return on investment than Tower Semiconductor. However, G III is 1.13 times more volatile than Tower Semiconductor. It trades about 0.08 of its potential returns per unit of risk. Tower Semiconductor is currently generating about 0.06 per unit of risk. If you would invest  2,380  in G III Apparel Group on September 3, 2024 and sell it today you would earn a total of  420.00  from holding G III Apparel Group or generate 17.65% return on investment over 90 days.

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

G III Apparel Group  vs.  Tower Semiconductor

G III Apparel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in G III Apparel Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, G III unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tower Semiconductor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Semiconductor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tower Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with G III and Tower Semiconductor

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

The idea behind G III Apparel Group and Tower Semiconductor 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.