Correlation Between MediaTek and Union Bank

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

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

Diversification Opportunities for MediaTek and Union Bank

-0.13

Correlation Coefficient

MediaTek  Union Bank

Good diversification

The 3 months correlation between MediaTek and Union is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding MediaTek and Union Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bank and MediaTek 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 MediaTek are associated (or correlated) with Union Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bank has no effect on the direction of MediaTek i.e., MediaTek and Union Bank go up and down completely randomly.

Pair Corralation between MediaTek and Union Bank

Assuming the 90 days trading horizon MediaTek is expected to generate 3.41 times more return on investment than Union Bank. However, MediaTek is 3.41 times more volatile than Union Bank of. It trades about 0.14 of its potential returns per unit of risk. Union Bank of is currently generating about 0.03 per unit of risk. If you would invest  131,000  in MediaTek on December 2, 2024 and sell it today you would earn a total of  20,500  from holding MediaTek or generate 15.65% return on investment over 90 days.

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

MediaTek  vs.  Union Bank of

MediaTek

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MediaTek are ranked lower than 11 (%) 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.

Union Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bank of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Union Bank is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with MediaTek and Union Bank

The main advantage of trading using opposite MediaTek and Union Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MediaTek position performs unexpectedly, Union Bank 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 Union Bank will offset losses from the drop in Union Bank's long position.

The idea behind MediaTek and Union Bank of 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.