Correlation Between Mega Financial and Deltamac Taiwan

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

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

Diversification Opportunities for Mega Financial and Deltamac Taiwan

-0.33

Correlation Coefficient

Mega Financial  Deltamac Taiwan

Very good diversification

The 3 months correlation between Mega and Deltamac is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Mega Financial Holding and Deltamac Taiwan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deltamac Taiwan and Mega 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 Mega Financial Holding are associated (or correlated) with Deltamac Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deltamac Taiwan has no effect on the direction of Mega Financial i.e., Mega Financial and Deltamac Taiwan go up and down completely randomly.

Pair Corralation between Mega Financial and Deltamac Taiwan

Assuming the 90 days trading horizon Mega Financial Holding is expected to generate 0.14 times more return on investment than Deltamac Taiwan. However, Mega Financial Holding is 7.12 times less risky than Deltamac Taiwan. It trades about 0.08 of its potential returns per unit of risk. Deltamac Taiwan Co is currently generating about -0.04 per unit of risk. If you would invest  3,865  in Mega Financial Holding on December 23, 2024 and sell it today you would earn a total of  105.00  from holding Mega Financial Holding or generate 2.72% return on investment over 90 days.

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

Mega Financial Holding  vs.  Deltamac Taiwan Co

Mega Financial Holding

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mega Financial Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Mega Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Deltamac Taiwan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deltamac Taiwan Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Mega Financial and Deltamac Taiwan

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

The idea behind Mega Financial Holding and Deltamac 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.