Correlation Between Tsingtao Brewery and Taiwan Semiconductor

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

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

Diversification Opportunities for Tsingtao Brewery and Taiwan Semiconductor

-0.15

Correlation Coefficient

Tsingtao Brewery  Taiwan Semiconductor

Good diversification

The 3 months correlation between Tsingtao and Taiwan is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and Tsingtao Brewery 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 Tsingtao Brewery 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 Tsingtao Brewery i.e., Tsingtao Brewery and Taiwan Semiconductor go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Taiwan Semiconductor

Assuming the 90 days trading horizon Tsingtao Brewery is expected to under-perform the Taiwan Semiconductor. In addition to that, Tsingtao Brewery is 1.27 times more volatile than Taiwan Semiconductor Manufacturing. It trades about -0.01 of its total potential returns per unit of risk. Taiwan Semiconductor Manufacturing is currently generating about 0.15 per unit of volatility. If you would invest  15,568  in Taiwan Semiconductor Manufacturing on September 29, 2024 and sell it today you would earn a total of  3,772  from holding Taiwan Semiconductor Manufacturing or generate 24.23% return on investment over 90 days.

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

Tsingtao Brewery  vs.  Taiwan Semiconductor Manufactu

Tsingtao Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tsingtao Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Tsingtao Brewery is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Taiwan Semiconductor

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Taiwan Semiconductor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tsingtao Brewery and Taiwan Semiconductor

The main advantage of trading using opposite Tsingtao Brewery and Taiwan Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tsingtao Brewery 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 Tsingtao Brewery 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.