Correlation Between MediaTek and ADLINK Technology
Can any of the company-specific risk be diversified away by investing in both MediaTek and ADLINK Technology 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 ADLINK Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MediaTek and ADLINK Technology, you can compare the effects of market volatilities on MediaTek and ADLINK Technology 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 ADLINK Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of MediaTek and ADLINK Technology.
Diversification Opportunities for MediaTek and ADLINK Technology
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MediaTek and ADLINK is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding MediaTek and ADLINK Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADLINK Technology 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 ADLINK Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADLINK Technology has no effect on the direction of MediaTek i.e., MediaTek and ADLINK Technology go up and down completely randomly.
Pair Corralation between MediaTek and ADLINK Technology
Assuming the 90 days trading horizon MediaTek is expected to generate 0.91 times more return on investment than ADLINK Technology. However, MediaTek is 1.1 times less risky than ADLINK Technology. It trades about 0.09 of its potential returns per unit of risk. ADLINK Technology is currently generating about 0.01 per unit of risk. If you would invest 69,700 in MediaTek on August 28, 2024 and sell it today you would earn a total of 58,300 from holding MediaTek or generate 83.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MediaTek vs. ADLINK Technology
Performance |
| Timeline |
| MediaTek |
| ADLINK Technology |
MediaTek and ADLINK Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MediaTek and ADLINK Technology
The main advantage of trading using opposite MediaTek and ADLINK Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MediaTek position performs unexpectedly, ADLINK Technology 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 ADLINK Technology will offset losses from the drop in ADLINK Technology's long position.The idea behind MediaTek and ADLINK Technology 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.| ADLINK Technology vs. Ibase Gaming | ADLINK Technology vs. Bank of Kaohsiung | ADLINK Technology vs. International Games System | ADLINK Technology vs. Chinese Gamer International |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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