Correlation Between HiTi Digital and MediaTek
Can any of the company-specific risk be diversified away by investing in both HiTi Digital 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 HiTi Digital and MediaTek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HiTi Digital and MediaTek, you can compare the effects of market volatilities on HiTi Digital 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 HiTi Digital with a short position of MediaTek. Check out your portfolio center. Please also check ongoing floating volatility patterns of HiTi Digital and MediaTek.
Diversification Opportunities for HiTi Digital and MediaTek
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HiTi and MediaTek is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding HiTi Digital and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek and HiTi Digital 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 HiTi Digital 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 HiTi Digital i.e., HiTi Digital and MediaTek go up and down completely randomly.
Pair Corralation between HiTi Digital and MediaTek
Assuming the 90 days trading horizon HiTi Digital is expected to generate 1.11 times less return on investment than MediaTek. But when comparing it to its historical volatility, HiTi Digital is 1.35 times less risky than MediaTek. It trades about 0.27 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HiTi Digital vs. MediaTek
Performance |
| Timeline |
| HiTi Digital |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| MediaTek |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
HiTi Digital and MediaTek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HiTi Digital and MediaTek
The main advantage of trading using opposite HiTi Digital and MediaTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HiTi Digital 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 HiTi Digital 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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