Correlation Between Utron and Tower Semiconductor

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

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

Diversification Opportunities for Utron and Tower Semiconductor

0.07

Correlation Coefficient

Utron  Tower Semiconductor

Significant diversification

The 3 months correlation between Utron and Tower is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Utron and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor and Utron 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 Utron are associated (or correlated) with Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of Utron i.e., Utron and Tower Semiconductor go up and down completely randomly.

Pair Corralation between Utron and Tower Semiconductor

Assuming the 90 days trading horizon Utron is expected to under-perform the Tower Semiconductor. In addition to that, Utron is 1.28 times more volatile than Tower Semiconductor. It trades about -0.28 of its total potential returns per unit of risk. Tower Semiconductor is currently generating about 0.19 per unit of volatility. If you would invest  1,338,000  in Tower Semiconductor on April 25, 2025 and sell it today you would earn a total of  288,000  from holding Tower Semiconductor or generate 21.52% return on investment over 90 days.

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

Utron  vs.  Tower Semiconductor

Utron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Utron has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tower Semiconductor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Semiconductor are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tower Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Utron and Tower Semiconductor

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

The idea behind Utron and Tower Semiconductor 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.