Correlation Between Taiwan Semiconductor and KGHM Polska

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

Diversification Opportunities for Taiwan Semiconductor and KGHM Polska

0.0

Correlation Coefficient

Taiwan Semiconductor  KGHM Polska

Pay attention - limited upside

The 3 months correlation between Taiwan and KGHM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and KGHM Polska Miedz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KGHM Polska Miedz 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 KGHM Polska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KGHM Polska Miedz has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and KGHM Polska go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and KGHM Polska

If you would invest  13,123  in Taiwan Semiconductor Manufacturing on March 12, 2024 and sell it today you would earn a total of  2,137  from holding Taiwan Semiconductor Manufacturing or generate 16.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Taiwan Semiconductor Manufactu  vs.  KGHM Polska Miedz

Taiwan Semiconductor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 10 (%) 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.

KGHM Polska Miedz

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days KGHM Polska Miedz has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, KGHM Polska is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Taiwan Semiconductor and KGHM Polska

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

The idea behind Taiwan Semiconductor Manufacturing and KGHM Polska Miedz 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.