Correlation Between MediaTek and Channel Well

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

By analyzing existing cross correlation between MediaTek and Channel Well Technology, you can compare the effects of market volatilities on MediaTek and Channel Well 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 Channel Well. Check out your portfolio center. Please also check ongoing floating volatility patterns of MediaTek and Channel Well.

Diversification Opportunities for MediaTek and Channel Well

0.81

Correlation Coefficient

MediaTek  Channel Well

Very poor diversification

The 3 months correlation between MediaTek and Channel is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding MediaTek and Channel Well Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Channel Well Technology 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 Channel Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Channel Well Technology has no effect on the direction of MediaTek i.e., MediaTek and Channel Well go up and down completely randomly.

Pair Corralation between MediaTek and Channel Well

Assuming the 90 days trading horizon MediaTek is expected to generate 3.81 times less return on investment than Channel Well. But when comparing it to its historical volatility, MediaTek is 1.29 times less risky than Channel Well. It trades about 0.05 of its potential returns per unit of risk. Channel Well Technology is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7,150  in Channel Well Technology on December 25, 2024 and sell it today you would earn a total of  1,670  from holding Channel Well Technology or generate 23.36% return on investment over 90 days.

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

MediaTek  vs.  Channel Well Technology

MediaTek

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MediaTek are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, MediaTek may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Channel Well Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Channel Well Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Channel Well showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MediaTek and Channel Well

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

The idea behind MediaTek and Channel Well Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.