Correlation Between MediaTek and LongDa Construction

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

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

Diversification Opportunities for MediaTek and LongDa Construction

-0.64

Correlation Coefficient

MediaTek  LongDa Construction

Excellent diversification

The 3 months correlation between MediaTek and LongDa is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding MediaTek and LongDa Construction Developmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LongDa Construction 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 LongDa Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LongDa Construction has no effect on the direction of MediaTek i.e., MediaTek and LongDa Construction go up and down completely randomly.

Pair Corralation between MediaTek and LongDa Construction

Assuming the 90 days trading horizon MediaTek is expected to generate 1.09 times more return on investment than LongDa Construction. However, MediaTek is 1.09 times more volatile than LongDa Construction Development. It trades about 0.15 of its potential returns per unit of risk. LongDa Construction Development is currently generating about -0.3 per unit of risk. If you would invest  130,500  in MediaTek on October 7, 2024 and sell it today you would earn a total of  6,000  from holding MediaTek or generate 4.6% return on investment over 90 days.

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

MediaTek  vs.  LongDa Construction Developmen

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.

LongDa Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LongDa Construction Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with MediaTek and LongDa Construction

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

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