Correlation Between Taiwan Semiconductor and Moderna

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

Diversification Opportunities for Taiwan Semiconductor and Moderna

-0.72

Correlation Coefficient

Taiwan Semiconductor  Moderna

Pay attention - limited upside

The 3 months correlation between Taiwan and Moderna is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Moderna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderna 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 Moderna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderna has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Moderna go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Moderna

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to generate 0.76 times more return on investment than Moderna. However, Taiwan Semiconductor Manufacturing is 1.32 times less risky than Moderna. It trades about 0.13 of its potential returns per unit of risk. Moderna is currently generating about -0.15 per unit of risk. If you would invest  12,381  in Taiwan Semiconductor Manufacturing on September 24, 2024 and sell it today you would earn a total of  2,614  from holding Taiwan Semiconductor Manufacturing or generate 21.11% return on investment over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  Moderna

Taiwan Semiconductor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Taiwan Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Moderna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moderna has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Taiwan Semiconductor and Moderna

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

The idea behind Taiwan Semiconductor Manufacturing and Moderna 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.