Correlation Between Opko Health and Tower Semiconductor

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

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

Diversification Opportunities for Opko Health and Tower Semiconductor

-0.14

Correlation Coefficient

Opko Health  Tower Semiconductor

Good diversification

The 3 months correlation between Opko and Tower is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Opko Health and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor and Opko Health 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 Opko Health 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 Opko Health i.e., Opko Health and Tower Semiconductor go up and down completely randomly.

Pair Corralation between Opko Health and Tower Semiconductor

Assuming the 90 days trading horizon Opko Health is expected to generate 1.95 times more return on investment than Tower Semiconductor. However, Opko Health is 1.95 times more volatile than Tower Semiconductor. It trades about 0.04 of its potential returns per unit of risk. Tower Semiconductor is currently generating about 0.03 per unit of risk. If you would invest  42,900  in Opko Health on September 23, 2024 and sell it today you would earn a total of  14,130  from holding Opko Health or generate 32.94% return on investment over 90 days.

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

Opko Health  vs.  Tower Semiconductor

Opko Health

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Opko Health are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, Opko Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tower Semiconductor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Semiconductor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tower Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Opko Health and Tower Semiconductor

The main advantage of trading using opposite Opko Health and Tower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Opko Health 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 Opko Health 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.