Correlation Between Valens and Tower Semiconductor

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

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

Diversification Opportunities for Valens and Tower Semiconductor

0.09

Correlation Coefficient

Valens  Tower Semiconductor

Significant diversification

The 3 months correlation between Valens and Tower is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Valens and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor and Valens 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 Valens 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 Valens i.e., Valens and Tower Semiconductor go up and down completely randomly.

Pair Corralation between Valens and Tower Semiconductor

Considering the 90-day investment horizon Valens is expected to under-perform the Tower Semiconductor. In addition to that, Valens is 1.71 times more volatile than Tower Semiconductor. It trades about -0.04 of its total potential returns per unit of risk. Tower Semiconductor is currently generating about 0.11 per unit of volatility. If you would invest  4,319  in Tower Semiconductor on September 24, 2024 and sell it today you would earn a total of  783.00  from holding Tower Semiconductor or generate 18.13% return on investment over 90 days.

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

Valens  vs.  Tower Semiconductor

Valens

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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. In spite of very unsteady technical and fundamental indicators, Tower Semiconductor displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valens and Tower Semiconductor

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

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.