Correlation Between Taiwan Semiconductor and Genfit

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

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

Diversification Opportunities for Taiwan Semiconductor and Genfit

-0.21

Correlation Coefficient

Taiwan Semiconductor  Genfit

Very good diversification

The 3 months correlation between Taiwan and Genfit is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Genfit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genfit 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 Manufacturing are associated (or correlated) with Genfit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genfit has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Genfit go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Genfit

Considering the 90-day investment horizon Taiwan Semiconductor Manufacturing is expected to generate 0.66 times more return on investment than Genfit. However, Taiwan Semiconductor Manufacturing is 1.52 times less risky than Genfit. It trades about 0.08 of its potential returns per unit of risk. Genfit is currently generating about -0.16 per unit of risk. If you would invest  18,624  in Taiwan Semiconductor Manufacturing on September 26, 2024 and sell it today you would earn a total of  2,112  from holding Taiwan Semiconductor Manufacturing or generate 11.34% return on investment over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  Genfit

Taiwan Semiconductor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Taiwan Semiconductor displayed solid returns over the last few months and may actually be approaching a breakup point.

Genfit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genfit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Taiwan Semiconductor and Genfit

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

The idea behind Taiwan Semiconductor Manufacturing and Genfit 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.