An Analysis of Semiconductor Stocks as an Opportunity for Portfolio Diversification

The semiconductor industry is a key driver of technological progress due to essential parts that are integrated in widely used electronic devices nowadays. Given its critical importance, this industry is constantly evolving in order to adapt to market requirements led by fast-paced consumer trends. Meanwhile, the global supply chain is undergoing pressure from other conditional factors, mostly the pandemic and trade restrictions in recent times. With potential to grow due to digitalization, semiconductor companies can be an attractive option to invest in. Building an investment portfolio is a challenging process regardless of the risk preference of an investor. Based on the concept of diversification, combining low-correlated assets from various industries can lead to an overall efficient portfolio with acceptable risk levels. The aim of this study is to analyze the evolution of eight selected semiconductor stocks from 2018 to 2022 and evaluate their relative performance to the benchmark index by using descriptive statistics and risk metrics drawn from their daily returns. Having an insight on the results obtained from historical data allows us to examine whether diversifying portfolios with semiconductor stocks represents an opportunity, mainly contributing to a pre-selection of stocks to mitigate the risk and support the investment decision.