Correlation Between Kamada and Tower Semiconductor

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Can any of the company-specific risk be diversified away by investing in both Kamada 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 Kamada and Tower Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kamada and Tower Semiconductor, you can compare the effects of market volatilities on Kamada 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 Kamada with a short position of Tower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kamada and Tower Semiconductor.

Diversification Opportunities for Kamada and Tower Semiconductor

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Kamada and Tower is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Kamada and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor and Kamada 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 Kamada 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 Kamada i.e., Kamada and Tower Semiconductor go up and down completely randomly.

Pair Corralation between Kamada and Tower Semiconductor

Assuming the 90 days trading horizon Kamada is expected to under-perform the Tower Semiconductor. In addition to that, Kamada is 1.16 times more volatile than Tower Semiconductor. It trades about -0.26 of its total potential returns per unit of risk. Tower Semiconductor is currently generating about 0.07 per unit of volatility. If you would invest  1,189,000  in Tower Semiconductor on December 29, 2023 and sell it today you would earn a total of  28,000  from holding Tower Semiconductor or generate 2.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Kamada  vs.  Tower Semiconductor

 Performance 
       Timeline  
Kamada 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Kamada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Tower Semiconductor 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Tower Semiconductor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tower Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Kamada and Tower Semiconductor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kamada and Tower Semiconductor

The main advantage of trading using opposite Kamada and Tower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kamada 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 Kamada 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.
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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