Correlation Between Taiwan Semiconductor and Intel

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

Diversification Opportunities for Taiwan Semiconductor and Intel

0.35

Correlation Coefficient

Taiwan Semiconductor  Intel

Weak diversification

The 3 months correlation between Taiwan and Intel is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and Intel go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and Intel

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to generate 0.51 times more return on investment than Intel. However, Taiwan Semiconductor Manufacturing is 1.96 times less risky than Intel. It trades about 0.2 of its potential returns per unit of risk. Intel is currently generating about 0.07 per unit of risk. If you would invest  18,201  in Taiwan Semiconductor Manufacturing on April 9, 2025 and sell it today you would earn a total of  1,299  from holding Taiwan Semiconductor Manufacturing or generate 7.14% return on investment over 90 days.

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

Taiwan Semiconductor Manufactu  vs.  Intel

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 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Taiwan Semiconductor reported solid returns over the last few months and may actually be approaching a breakup point.

Intel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Intel is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Taiwan Semiconductor and Intel

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

The idea behind Taiwan Semiconductor Manufacturing and Intel 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.