Correlation Between MediaTek and Taiwan Allied
Can any of the company-specific risk be diversified away by investing in both MediaTek and Taiwan Allied 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 Taiwan Allied into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MediaTek and Taiwan Allied Container, you can compare the effects of market volatilities on MediaTek and Taiwan Allied 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 Taiwan Allied. Check out your portfolio center. Please also check ongoing floating volatility patterns of MediaTek and Taiwan Allied.
Diversification Opportunities for MediaTek and Taiwan Allied
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MediaTek and Taiwan is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding MediaTek and Taiwan Allied Container in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Allied Container 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 Taiwan Allied. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Allied Container has no effect on the direction of MediaTek i.e., MediaTek and Taiwan Allied go up and down completely randomly.
Pair Corralation between MediaTek and Taiwan Allied
Assuming the 90 days trading horizon MediaTek is expected to generate 1.09 times more return on investment than Taiwan Allied. However, MediaTek is 1.09 times more volatile than Taiwan Allied Container. It trades about 0.09 of its potential returns per unit of risk. Taiwan Allied Container is currently generating about 0.06 per unit of risk. If you would invest 141,000 in MediaTek on October 24, 2024 and sell it today you would earn a total of 5,500 from holding MediaTek or generate 3.9% 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. Taiwan Allied Container
Performance |
| Timeline |
| MediaTek |
| Taiwan Allied Container |
MediaTek and Taiwan Allied Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MediaTek and Taiwan Allied
The main advantage of trading using opposite MediaTek and Taiwan Allied positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MediaTek position performs unexpectedly, Taiwan Allied 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 Taiwan Allied will offset losses from the drop in Taiwan Allied's long position.| MediaTek vs. Hon Hai Precision | MediaTek vs. United Microelectronics | MediaTek vs. LARGAN Precision Co | MediaTek vs. Delta Electronics |
| Taiwan Allied vs. Quanta Storage | Taiwan Allied vs. Datavan International | Taiwan Allied vs. Sports Gear Co | Taiwan Allied vs. Wistron Information Technology |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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