Correlation Between MediaTek and Handa Pharmaceuticals

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

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

Diversification Opportunities for MediaTek and Handa Pharmaceuticals

0.41

Correlation Coefficient

MediaTek  Handa Pharmaceuticals

Very weak diversification

The 3 months correlation between MediaTek and Handa is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding MediaTek and Handa Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Handa Pharmaceuticals 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 Handa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Handa Pharmaceuticals has no effect on the direction of MediaTek i.e., MediaTek and Handa Pharmaceuticals go up and down completely randomly.

Pair Corralation between MediaTek and Handa Pharmaceuticals

Assuming the 90 days trading horizon MediaTek is expected to generate 12.13 times less return on investment than Handa Pharmaceuticals. But when comparing it to its historical volatility, MediaTek is 2.64 times less risky than Handa Pharmaceuticals. It trades about 0.04 of its potential returns per unit of risk. Handa Pharmaceuticals is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  6,100  in Handa Pharmaceuticals on October 22, 2024 and sell it today you would earn a total of  1,340  from holding Handa Pharmaceuticals or generate 21.97% return on investment over 90 days.

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

MediaTek  vs.  Handa Pharmaceuticals

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.

Handa Pharmaceuticals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Handa Pharmaceuticals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Handa Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MediaTek and Handa Pharmaceuticals

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

The idea behind MediaTek and Handa Pharmaceuticals 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.