Correlation Between Yuanta Financial and MediaTek

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

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

Diversification Opportunities for Yuanta Financial and MediaTek

0.69

Correlation Coefficient

Yuanta Financial  MediaTek

Poor diversification

The 3 months correlation between Yuanta and MediaTek is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Yuanta Financial Holdings and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek and Yuanta Financial 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 Yuanta Financial Holdings 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 Yuanta Financial i.e., Yuanta Financial and MediaTek go up and down completely randomly.

Pair Corralation between Yuanta Financial and MediaTek

Assuming the 90 days trading horizon Yuanta Financial is expected to generate 2.43 times less return on investment than MediaTek. But when comparing it to its historical volatility, Yuanta Financial Holdings is 1.96 times less risky than MediaTek. It trades about 0.05 of its potential returns per unit of risk. MediaTek is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  138,600  in MediaTek on December 31, 2024 and sell it today you would earn a total of  7,900  from holding MediaTek or generate 5.7% return on investment over 90 days.

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

Yuanta Financial Holdings  vs.  MediaTek

Yuanta Financial Holdings

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta Financial Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yuanta Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 May 2025.

Pair Trading with Yuanta Financial and MediaTek

The main advantage of trading using opposite Yuanta Financial and MediaTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yuanta Financial 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 Yuanta Financial Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.