Correlation Between Elite Semiconductor and MediaTek

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

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

Diversification Opportunities for Elite Semiconductor and MediaTek

-0.53

Correlation Coefficient

Elite Semiconductor  MediaTek

Excellent diversification

The 3 months correlation between Elite and MediaTek is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Elite Semiconductor Memory and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek and Elite Semiconductor 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 Elite Semiconductor Memory 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 Elite Semiconductor i.e., Elite Semiconductor and MediaTek go up and down completely randomly.

Pair Corralation between Elite Semiconductor and MediaTek

Assuming the 90 days trading horizon Elite Semiconductor Memory is expected to under-perform the MediaTek. In addition to that, Elite Semiconductor is 1.02 times more volatile than MediaTek. It trades about -0.02 of its total potential returns per unit of risk. MediaTek is currently generating about 0.08 per unit of volatility. If you would invest  73,800  in MediaTek on September 19, 2024 and sell it today you would earn a total of  68,700  from holding MediaTek or generate 93.09% return on investment over 90 days.

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

Elite Semiconductor Memory  vs.  MediaTek

Elite Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elite Semiconductor Memory 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.

MediaTek

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MediaTek are ranked lower than 15 (%) 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.

Pair Trading with Elite Semiconductor and MediaTek

The main advantage of trading using opposite Elite Semiconductor and MediaTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elite Semiconductor 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 Elite Semiconductor Memory 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.