Correlation Between MediaTek and AzureWave Technologies

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

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

Diversification Opportunities for MediaTek and AzureWave Technologies

0.45

Correlation Coefficient

MediaTek  AzureWave Technologies

Very weak diversification

The 3 months correlation between MediaTek and AzureWave is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding MediaTek and AzureWave Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AzureWave Technologies 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 AzureWave Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AzureWave Technologies has no effect on the direction of MediaTek i.e., MediaTek and AzureWave Technologies go up and down completely randomly.

Pair Corralation between MediaTek and AzureWave Technologies

Assuming the 90 days trading horizon MediaTek is expected to generate 8.41 times less return on investment than AzureWave Technologies. But when comparing it to its historical volatility, MediaTek is 2.58 times less risky than AzureWave Technologies. It trades about 0.07 of its potential returns per unit of risk. AzureWave Technologies is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  4,240  in AzureWave Technologies on October 7, 2024 and sell it today you would earn a total of  2,010  from holding AzureWave Technologies or generate 47.41% return on investment over 90 days.

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

MediaTek  vs.  AzureWave Technologies

MediaTek

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MediaTek are ranked lower than 6 (%) 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 February 2025.

AzureWave Technologies

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with MediaTek and AzureWave Technologies

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

The idea behind MediaTek and AzureWave Technologies 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.