Correlation Between Eva Airways and MediaTek
Can any of the company-specific risk be diversified away by investing in both Eva Airways and MediaTek 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 Eva Airways and MediaTek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eva Airways Corp and MediaTek, you can compare the effects of market volatilities on Eva Airways and MediaTek 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 Eva Airways with a short position of MediaTek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eva Airways and MediaTek.
Diversification Opportunities for Eva Airways and MediaTek
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eva and MediaTek is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Eva Airways Corp and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek and Eva Airways 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 Eva Airways Corp are associated (or correlated) with MediaTek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MediaTek has no effect on the direction of Eva Airways i.e., Eva Airways and MediaTek go up and down completely randomly.
Pair Corralation between Eva Airways and MediaTek
Assuming the 90 days trading horizon Eva Airways is expected to generate 2.86 times less return on investment than MediaTek. But when comparing it to its historical volatility, Eva Airways Corp is 1.73 times less risky than MediaTek. It trades about 0.13 of its potential returns per unit of risk. MediaTek is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 135,000 in MediaTek on November 2, 2024 and sell it today you would earn a total of 11,500 from holding MediaTek or generate 8.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eva Airways Corp vs. MediaTek
Performance |
| Timeline |
| Eva Airways Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| MediaTek |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Eva Airways and MediaTek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eva Airways and MediaTek
The main advantage of trading using opposite Eva Airways and MediaTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eva Airways position performs unexpectedly, MediaTek 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 MediaTek will offset losses from the drop in MediaTek's long position.The idea behind Eva Airways Corp and MediaTek 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.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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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