Correlation Between MediaTek and Nankang Rubber
Can any of the company-specific risk be diversified away by investing in both MediaTek and Nankang Rubber 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 MediaTek and Nankang Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MediaTek and Nankang Rubber Tire, you can compare the effects of market volatilities on MediaTek and Nankang Rubber 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 MediaTek with a short position of Nankang Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of MediaTek and Nankang Rubber.
Diversification Opportunities for MediaTek and Nankang Rubber
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MediaTek and Nankang is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding MediaTek and Nankang Rubber Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nankang Rubber Tire and MediaTek 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 MediaTek are associated (or correlated) with Nankang Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nankang Rubber Tire has no effect on the direction of MediaTek i.e., MediaTek and Nankang Rubber go up and down completely randomly.
Pair Corralation between MediaTek and Nankang Rubber
Assuming the 90 days trading horizon MediaTek is expected to generate 1.32 times more return on investment than Nankang Rubber. However, MediaTek is 1.32 times more volatile than Nankang Rubber Tire. It trades about 0.06 of its potential returns per unit of risk. Nankang Rubber Tire is currently generating about 0.05 per unit of risk. If you would invest 71,600 in MediaTek on August 28, 2024 and sell it today you would earn a total of 56,400 from holding MediaTek or generate 78.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MediaTek vs. Nankang Rubber Tire
Performance |
| Timeline |
| MediaTek |
| Nankang Rubber Tire |
MediaTek and Nankang Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MediaTek and Nankang Rubber
The main advantage of trading using opposite MediaTek and Nankang Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MediaTek position performs unexpectedly, Nankang Rubber 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 Nankang Rubber will offset losses from the drop in Nankang Rubber's long position.| MediaTek vs. Hon Hai Precision | MediaTek vs. United Microelectronics | MediaTek vs. LARGAN Precision Co | MediaTek vs. Delta Electronics |
| Nankang Rubber vs. Taiwan Semiconductor Manufacturing | Nankang Rubber vs. Hon Hai Precision | Nankang Rubber vs. MediaTek | Nankang Rubber vs. Chunghwa Telecom Co |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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