Correlation Between MarketAxess Holdings and Taiwan Semiconductor

Can any of the company-specific risk be diversified away by investing in both MarketAxess Holdings and Taiwan 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 MarketAxess Holdings and Taiwan Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MarketAxess Holdings and Taiwan Semiconductor Manufacturing, you can compare the effects of market volatilities on MarketAxess Holdings and Taiwan 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 MarketAxess Holdings with a short position of Taiwan Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of MarketAxess Holdings and Taiwan Semiconductor.

Diversification Opportunities for MarketAxess Holdings and Taiwan Semiconductor

-0.79

Correlation Coefficient

MarketAxess Holdings  Taiwan Semiconductor

Pay attention - limited upside

The 3 months correlation between MarketAxess and Taiwan is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding MarketAxess Holdings and Taiwan Semiconductor Manufactu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Semiconductor and MarketAxess Holdings 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 MarketAxess Holdings are associated (or correlated) with Taiwan Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Semiconductor has no effect on the direction of MarketAxess Holdings i.e., MarketAxess Holdings and Taiwan Semiconductor go up and down completely randomly.

Pair Corralation between MarketAxess Holdings and Taiwan Semiconductor

Assuming the 90 days trading horizon MarketAxess Holdings is expected to under-perform the Taiwan Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, MarketAxess Holdings is 5.62 times less risky than Taiwan Semiconductor. The stock trades about -0.1 of its potential returns per unit of risk. The Taiwan Semiconductor Manufacturing is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  12,580  in Taiwan Semiconductor Manufacturing on May 5, 2025 and sell it today you would earn a total of  3,673  from holding Taiwan Semiconductor Manufacturing or generate 29.2% return on investment over 90 days.

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

MarketAxess Holdings  vs.  Taiwan Semiconductor Manufactu

MarketAxess Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days MarketAxess Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, MarketAxess Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Taiwan Semiconductor

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Semiconductor Manufacturing are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Taiwan Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MarketAxess Holdings and Taiwan Semiconductor

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

The idea behind MarketAxess Holdings and Taiwan Semiconductor Manufacturing 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.