Correlation Between Taiwan Semiconductor and CPFL Energia

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

Diversification Opportunities for Taiwan Semiconductor and CPFL Energia

0.42

Correlation Coefficient

Taiwan Semiconductor  CPFL Energia

Very weak diversification

The 3 months correlation between Taiwan and CPFL is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Semiconductor Manufactu and CPFL Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPFL Energia SA 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 CPFL Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPFL Energia SA has no effect on the direction of Taiwan Semiconductor i.e., Taiwan Semiconductor and CPFL Energia go up and down completely randomly.

Pair Corralation between Taiwan Semiconductor and CPFL Energia

Assuming the 90 days trading horizon Taiwan Semiconductor Manufacturing is expected to generate 1.44 times more return on investment than CPFL Energia. However, Taiwan Semiconductor is 1.44 times more volatile than CPFL Energia SA. It trades about 0.29 of its potential returns per unit of risk. CPFL Energia SA is currently generating about 0.08 per unit of risk. If you would invest  11,719  in Taiwan Semiconductor Manufacturing on April 25, 2025 and sell it today you would earn a total of  4,851  from holding Taiwan Semiconductor Manufacturing or generate 41.39% 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.  CPFL Energia SA

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 23 (%) 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.

CPFL Energia SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CPFL Energia SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, CPFL Energia may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Taiwan Semiconductor and CPFL Energia

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

The idea behind Taiwan Semiconductor Manufacturing and CPFL Energia SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.