Correlation Between Weltrend Semiconductor and MediaTek

Can any of the company-specific risk be diversified away by investing in both Weltrend Semiconductor 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 Weltrend Semiconductor and MediaTek into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Weltrend Semiconductor and MediaTek, you can compare the effects of market volatilities on Weltrend Semiconductor 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 Weltrend Semiconductor with a short position of MediaTek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weltrend Semiconductor and MediaTek.

Diversification Opportunities for Weltrend Semiconductor and MediaTek

0.01

Correlation Coefficient

Weltrend Semiconductor  MediaTek

Significant diversification

The 3 months correlation between Weltrend and MediaTek is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Weltrend Semiconductor and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek and Weltrend Semiconductor 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 Weltrend Semiconductor 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 Weltrend Semiconductor i.e., Weltrend Semiconductor and MediaTek go up and down completely randomly.

Pair Corralation between Weltrend Semiconductor and MediaTek

Assuming the 90 days trading horizon Weltrend Semiconductor is expected to generate 2.46 times less return on investment than MediaTek. In addition to that, Weltrend Semiconductor is 1.6 times more volatile than MediaTek. It trades about 0.05 of its total potential returns per unit of risk. MediaTek is currently generating about 0.19 per unit of volatility. If you would invest  112,000  in MediaTek on September 19, 2024 and sell it today you would earn a total of  30,500  from holding MediaTek or generate 27.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Weltrend Semiconductor  vs.  MediaTek

Weltrend Semiconductor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Weltrend Semiconductor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Weltrend Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MediaTek

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MediaTek are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, MediaTek showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weltrend Semiconductor and MediaTek

The main advantage of trading using opposite Weltrend Semiconductor and MediaTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weltrend Semiconductor 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 Weltrend Semiconductor 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.