Correlation Between MediaTek and Andes Technology

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

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

Diversification Opportunities for MediaTek and Andes Technology

0.55

Correlation Coefficient

MediaTek  Andes Technology

Very weak diversification

The 3 months correlation between MediaTek and Andes is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding MediaTek and Andes Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andes Technology Corp 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 Andes Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andes Technology Corp has no effect on the direction of MediaTek i.e., MediaTek and Andes Technology go up and down completely randomly.

Pair Corralation between MediaTek and Andes Technology

Assuming the 90 days trading horizon MediaTek is expected to generate 6.34 times less return on investment than Andes Technology. But when comparing it to its historical volatility, MediaTek is 1.71 times less risky than Andes Technology. It trades about 0.02 of its potential returns per unit of risk. Andes Technology Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  38,100  in Andes Technology Corp on December 4, 2024 and sell it today you would earn a total of  1,300  from holding Andes Technology Corp or generate 3.41% return on investment over 90 days.

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

MediaTek  vs.  Andes Technology Corp

MediaTek

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MediaTek are ranked lower than 10 (%) 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.

Andes Technology Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Andes Technology Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Andes Technology 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 Andes Technology

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

The idea behind MediaTek and Andes Technology Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.