Correlation Between Sino Horizon and MediaTek
Can any of the company-specific risk be diversified away by investing in both Sino Horizon 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 Sino Horizon and MediaTek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sino Horizon Holdings and MediaTek, you can compare the effects of market volatilities on Sino Horizon 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 Sino Horizon with a short position of MediaTek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sino Horizon and MediaTek.
Diversification Opportunities for Sino Horizon and MediaTek
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sino and MediaTek is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sino Horizon Holdings and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek and Sino Horizon 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 Sino Horizon Holdings 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 Sino Horizon i.e., Sino Horizon and MediaTek go up and down completely randomly.
Pair Corralation between Sino Horizon and MediaTek
Assuming the 90 days trading horizon Sino Horizon Holdings is expected to under-perform the MediaTek. In addition to that, Sino Horizon is 1.56 times more volatile than MediaTek. It trades about -0.04 of its total potential returns per unit of risk. MediaTek is currently generating about 0.13 per unit of volatility. If you would invest 147,000 in MediaTek on November 9, 2024 and sell it today you would earn a total of 5,500 from holding MediaTek or generate 3.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sino Horizon Holdings vs. MediaTek
Performance |
| Timeline |
| Sino Horizon Holdings |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
| MediaTek |
Risk-Adjusted Performance
Good
Weak | Strong |
Sino Horizon and MediaTek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sino Horizon and MediaTek
The main advantage of trading using opposite Sino Horizon and MediaTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sino Horizon 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 Sino Horizon Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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