Correlation Between Tower Semiconductor and Antofagasta PLC
Can any of the company-specific risk be diversified away by investing in both Tower Semiconductor and Antofagasta PLC 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 Antofagasta PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tower Semiconductor and Antofagasta PLC, you can compare the effects of market volatilities on Tower Semiconductor and Antofagasta PLC 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 Antofagasta PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Semiconductor and Antofagasta PLC.
Diversification Opportunities for Tower Semiconductor and Antofagasta PLC
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tower and Antofagasta is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and Antofagasta PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antofagasta PLC 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 Antofagasta PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antofagasta PLC has no effect on the direction of Tower Semiconductor i.e., Tower Semiconductor and Antofagasta PLC go up and down completely randomly.
Pair Corralation between Tower Semiconductor and Antofagasta PLC
Given the investment horizon of 90 days Tower Semiconductor is expected to under-perform the Antofagasta PLC. But the stock apears to be less risky and, when comparing its historical volatility, Tower Semiconductor is 1.27 times less risky than Antofagasta PLC. The stock trades about -0.06 of its potential returns per unit of risk. The Antofagasta PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,845 in Antofagasta PLC on January 25, 2024 and sell it today you would earn a total of 854.00 from holding Antofagasta PLC or generate 46.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Tower Semiconductor vs. Antofagasta PLC
Performance |
Timeline |
Tower Semiconductor |
Antofagasta PLC |
Tower Semiconductor and Antofagasta PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tower Semiconductor and Antofagasta PLC
The main advantage of trading using opposite Tower Semiconductor and Antofagasta PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Semiconductor position performs unexpectedly, Antofagasta PLC 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 Antofagasta PLC will offset losses from the drop in Antofagasta PLC's long position.The idea behind Tower Semiconductor and Antofagasta PLC 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.Antofagasta PLC vs. Imperial Metals | Antofagasta PLC vs. Bell Copper | Antofagasta PLC vs. Copper Fox Metals | Antofagasta PLC vs. Nevada Copper Corp |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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