Correlation Between Taiwan Semiconductor and Navitas Semiconductor

Can any of the company-specific risk be diversified away by investing in both Taiwan Semiconductor and Navitas 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 Taiwan Semiconductor and Navitas Semiconductor 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 Navitas Semiconductor Corp, you can compare the effects of market volatilities on Taiwan Semiconductor and Navitas 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 Taiwan Semiconductor with a short position of Navitas Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Semiconductor and Navitas Semiconductor.

Diversification Opportunities for Taiwan Semiconductor and Navitas Semiconductor

0.34

Correlation Coefficient

Taiwan Semiconductor  Navitas Semiconductor

Weak diversification

The 3 months correlation between Taiwan and Navitas is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Navitas Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navitas Semiconductor 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 Navitas Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navitas Semiconductor has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Navitas Semiconductor go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Navitas Semiconductor

Considering the 90-day investment horizon Taiwan Semiconductor is expected to generate 5.78 times less return on investment than Navitas Semiconductor. But when comparing it to its historical volatility, Taiwan Semiconductor Manufacturing is 2.66 times less risky than Navitas Semiconductor. It trades about 0.08 of its potential returns per unit of risk. Navitas Semiconductor Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  232.00  in Navitas Semiconductor Corp on September 12, 2024 and sell it today you would earn a total of  203.00  from holding Navitas Semiconductor Corp or generate 87.5% return on investment over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  Navitas Semiconductor Corp

Taiwan Semiconductor

Risk-Adjusted Performance

6 of 100

OK

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.

Navitas Semiconductor

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Navitas Semiconductor Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Navitas Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Semiconductor and Navitas Semiconductor

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

The idea behind Taiwan Semiconductor Manufacturing and Navitas Semiconductor Corp 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .