Correlation Between Tower Semiconductor and New Economy
Can any of the company-specific risk be diversified away by investing in both Tower Semiconductor and New Economy 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 Tower Semiconductor and New Economy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tower Semiconductor and New Economy Fund, you can compare the effects of market volatilities on Tower Semiconductor and New Economy 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 Tower Semiconductor with a short position of New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Semiconductor and New Economy.
Diversification Opportunities for Tower Semiconductor and New Economy
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tower and New is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund and Tower 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 Tower Semiconductor are associated (or correlated) with New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Tower Semiconductor i.e., Tower Semiconductor and New Economy go up and down completely randomly.
Pair Corralation between Tower Semiconductor and New Economy
Given the investment horizon of 90 days Tower Semiconductor is expected to under-perform the New Economy. In addition to that, Tower Semiconductor is 2.48 times more volatile than New Economy Fund. It trades about -0.06 of its total potential returns per unit of risk. New Economy Fund is currently generating about 0.11 per unit of volatility. If you would invest 4,635 in New Economy Fund on January 26, 2024 and sell it today you would earn a total of 1,141 from holding New Economy Fund or generate 24.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tower Semiconductor vs. New Economy Fund
Performance |
| Timeline |
| Tower Semiconductor |
| New Economy Fund |
Tower Semiconductor and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tower Semiconductor and New Economy
The main advantage of trading using opposite Tower Semiconductor and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Semiconductor position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.| Tower Semiconductor vs. Nova | Tower Semiconductor vs. AudioCodes | Tower Semiconductor vs. Nice Ltd ADR | Tower Semiconductor vs. Elbit Systems |
| New Economy vs. American Funds New | New Economy vs. New Perspective Fund | New Economy vs. New Perspective Fund | New Economy vs. New Perspective Fund |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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