Correlation Between Ingentec and MediaTek
Can any of the company-specific risk be diversified away by investing in both Ingentec 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 Ingentec and MediaTek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ingentec and MediaTek, you can compare the effects of market volatilities on Ingentec 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 Ingentec with a short position of MediaTek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ingentec and MediaTek.
Diversification Opportunities for Ingentec and MediaTek
Excellent diversification
The 3 months correlation between Ingentec and MediaTek is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ingentec and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek and Ingentec 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 Ingentec 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 Ingentec i.e., Ingentec and MediaTek go up and down completely randomly.
Pair Corralation between Ingentec and MediaTek
Assuming the 90 days trading horizon Ingentec is expected to generate 1.33 times less return on investment than MediaTek. But when comparing it to its historical volatility, Ingentec is 1.25 times less risky than MediaTek. It trades about 0.19 of its potential returns per unit of risk. MediaTek is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 136,500 in MediaTek on November 4, 2024 and sell it today you would earn a total of 10,000 from holding MediaTek or generate 7.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ingentec vs. MediaTek
Performance |
| Timeline |
| Ingentec |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| MediaTek |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Ingentec and MediaTek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ingentec and MediaTek
The main advantage of trading using opposite Ingentec and MediaTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ingentec 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 Ingentec 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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