Correlation Between Tower Semiconductor and MetLife
Can any of the company-specific risk be diversified away by investing in both Tower Semiconductor and MetLife 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 MetLife into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tower Semiconductor and MetLife, you can compare the effects of market volatilities on Tower Semiconductor and MetLife 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 MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Semiconductor and MetLife.
Diversification Opportunities for Tower Semiconductor and MetLife
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tower and MetLife is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife 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 MetLife. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetLife has no effect on the direction of Tower Semiconductor i.e., Tower Semiconductor and MetLife go up and down completely randomly.
Pair Corralation between Tower Semiconductor and MetLife
Assuming the 90 days trading horizon Tower Semiconductor is expected to generate 1.82 times more return on investment than MetLife. However, Tower Semiconductor is 1.82 times more volatile than MetLife. It trades about 0.12 of its potential returns per unit of risk. MetLife is currently generating about -0.07 per unit of risk. If you would invest 1,231,000 in Tower Semiconductor on February 8, 2024 and sell it today you would earn a total of 48,000 from holding Tower Semiconductor or generate 3.9% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 65.22% |
Values | Daily Returns |
Tower Semiconductor vs. MetLife
Performance |
Timeline |
Tower Semiconductor |
MetLife |
Tower Semiconductor and MetLife Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tower Semiconductor and MetLife
The main advantage of trading using opposite Tower Semiconductor and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Semiconductor position performs unexpectedly, MetLife 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 MetLife will offset losses from the drop in MetLife's long position.Tower Semiconductor vs. Hilan | Tower Semiconductor vs. Danel | Tower Semiconductor vs. Fattal 1998 Holdings | Tower Semiconductor vs. Malam Team |
MetLife vs. Lincoln National | MetLife vs. Aflac Incorporated | MetLife vs. Unum Group | MetLife vs. Manulife Financial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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