Correlation Between MediaTek and Parade Technologies

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

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

Diversification Opportunities for MediaTek and Parade Technologies

0.42

Correlation Coefficient

MediaTek  Parade Technologies

Very weak diversification

The 3 months correlation between MediaTek and Parade is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding MediaTek and Parade Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parade 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 Parade Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parade Technologies has no effect on the direction of MediaTek i.e., MediaTek and Parade Technologies go up and down completely randomly.

Pair Corralation between MediaTek and Parade Technologies

Assuming the 90 days trading horizon MediaTek is expected to generate 1.07 times less return on investment than Parade Technologies. But when comparing it to its historical volatility, MediaTek is 1.4 times less risky than Parade Technologies. It trades about 0.28 of its potential returns per unit of risk. Parade Technologies is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  70,900  in Parade Technologies on September 27, 2024 and sell it today you would earn a total of  7,500  from holding Parade Technologies or generate 10.58% return on investment over 90 days.

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

MediaTek  vs.  Parade Technologies

MediaTek

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MediaTek are ranked lower than 7 (%) 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 January 2025.

Parade Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parade Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Parade Technologies 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 Parade Technologies

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

The idea behind MediaTek and Parade 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.