Correlation Between Taiwan Semiconductor and Amtech Systems

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

Diversification Opportunities for Taiwan Semiconductor and Amtech Systems

0.57

Correlation Coefficient

Taiwan Semiconductor  Amtech Systems

Very weak diversification

The 3 months correlation between Taiwan and Amtech is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Amtech Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amtech Systems 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 Amtech Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amtech Systems has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Amtech Systems go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Amtech Systems

Considering the 90-day investment horizon Taiwan Semiconductor is expected to generate 1.14 times less return on investment than Amtech Systems. But when comparing it to its historical volatility, Taiwan Semiconductor Manufacturing is 1.05 times less risky than Amtech Systems. It trades about 0.18 of its potential returns per unit of risk. Amtech Systems is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  475.00  in Amtech Systems on February 17, 2024 and sell it today you would earn a total of  52.00  from holding Amtech Systems or generate 10.95% return on investment over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  Amtech Systems

Taiwan Semiconductor

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Taiwan Semiconductor displayed solid returns over the last few months and may actually be approaching a breakup point.

Amtech Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amtech Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Amtech Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Semiconductor and Amtech Systems

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

The idea behind Taiwan Semiconductor Manufacturing and Amtech Systems 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.