Correlation Between MediaTek and Formosa International
Can any of the company-specific risk be diversified away by investing in both MediaTek and Formosa International 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 Formosa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MediaTek and Formosa International Hotels, you can compare the effects of market volatilities on MediaTek and Formosa International 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 Formosa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of MediaTek and Formosa International.
Diversification Opportunities for MediaTek and Formosa International
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between MediaTek and Formosa is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding MediaTek and Formosa International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa International 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 Formosa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa International has no effect on the direction of MediaTek i.e., MediaTek and Formosa International go up and down completely randomly.
Pair Corralation between MediaTek and Formosa International
Assuming the 90 days trading horizon MediaTek is expected to generate 1.78 times more return on investment than Formosa International. However, MediaTek is 1.78 times more volatile than Formosa International Hotels. It trades about 0.06 of its potential returns per unit of risk. Formosa International Hotels is currently generating about -0.03 per unit of risk. If you would invest 94,200 in MediaTek on August 24, 2024 and sell it today you would earn a total of 32,300 from holding MediaTek or generate 34.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MediaTek vs. Formosa International Hotels
Performance |
| Timeline |
| MediaTek |
| Formosa International |
MediaTek and Formosa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MediaTek and Formosa International
The main advantage of trading using opposite MediaTek and Formosa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MediaTek position performs unexpectedly, Formosa International 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 Formosa International will offset losses from the drop in Formosa International's long position.| MediaTek vs. Novatek Microelectronics Corp | MediaTek vs. Quanta Computer | MediaTek vs. United Microelectronics |
| Formosa International vs. Taiwan Semiconductor Manufacturing | Formosa International vs. Hon Hai Precision | Formosa International vs. MediaTek | Formosa International 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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