Correlation Between Union Bank and MediaTek

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

By analyzing existing cross correlation between Union Bank of and MediaTek, you can compare the effects of market volatilities on Union Bank and MediaTek 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 Union Bank with a short position of MediaTek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Bank and MediaTek.

Diversification Opportunities for Union Bank and MediaTek

0.09

Correlation Coefficient

Union Bank  MediaTek

Significant diversification

The 3 months correlation between Union and MediaTek is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Union Bank of and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek and Union Bank 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 Union Bank of are associated (or correlated) with MediaTek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MediaTek has no effect on the direction of Union Bank i.e., Union Bank and MediaTek go up and down completely randomly.

Pair Corralation between Union Bank and MediaTek

Assuming the 90 days trading horizon Union Bank of is expected to generate 0.38 times more return on investment than MediaTek. However, Union Bank of is 2.66 times less risky than MediaTek. It trades about 0.28 of its potential returns per unit of risk. MediaTek is currently generating about 0.05 per unit of risk. If you would invest  1,525  in Union Bank of on December 28, 2024 and sell it today you would earn a total of  200.00  from holding Union Bank of or generate 13.11% return on investment over 90 days.

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

Union Bank of  vs.  MediaTek

Union Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bank of are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Union Bank showed solid returns over the last few months and may actually be approaching a breakup point.

MediaTek

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MediaTek are ranked lower than 4 (%) 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 April 2025.

Pair Trading with Union Bank and MediaTek

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

The idea behind Union Bank of and MediaTek 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.