Correlation Between MediaTek and Tigerair Taiwan

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

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

Diversification Opportunities for MediaTek and Tigerair Taiwan

0.31

Correlation Coefficient

MediaTek  Tigerair Taiwan

Weak diversification

The 3 months correlation between MediaTek and Tigerair is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding MediaTek and Tigerair Taiwan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tigerair Taiwan 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 Tigerair Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tigerair Taiwan has no effect on the direction of MediaTek i.e., MediaTek and Tigerair Taiwan go up and down completely randomly.

Pair Corralation between MediaTek and Tigerair Taiwan

Assuming the 90 days trading horizon MediaTek is expected to generate 0.7 times more return on investment than Tigerair Taiwan. However, MediaTek is 1.43 times less risky than Tigerair Taiwan. It trades about 0.18 of its potential returns per unit of risk. Tigerair Taiwan Co is currently generating about 0.08 per unit of risk. If you would invest  113,000  in MediaTek on September 15, 2024 and sell it today you would earn a total of  28,000  from holding MediaTek or generate 24.78% return on investment over 90 days.

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

MediaTek  vs.  Tigerair Taiwan Co

MediaTek

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MediaTek are ranked lower than 13 (%) 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.

Tigerair Taiwan

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with MediaTek and Tigerair Taiwan

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

The idea behind MediaTek and Tigerair Taiwan Co 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.