Correlation Between FIT Holding and MediaTek

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

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

Diversification Opportunities for FIT Holding and MediaTek

0.28

Correlation Coefficient

FIT Holding  MediaTek

Modest diversification

The 3 months correlation between FIT and MediaTek is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding FIT Holding Co and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek and FIT Holding 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 FIT Holding Co 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 FIT Holding i.e., FIT Holding and MediaTek go up and down completely randomly.

Pair Corralation between FIT Holding and MediaTek

Assuming the 90 days trading horizon FIT Holding is expected to generate 1.32 times less return on investment than MediaTek. In addition to that, FIT Holding is 1.5 times more volatile than MediaTek. It trades about 0.09 of its total potential returns per unit of risk. MediaTek is currently generating about 0.18 per unit of volatility. If you would invest  117,500  in MediaTek on September 29, 2024 and sell it today you would earn a total of  25,500  from holding MediaTek or generate 21.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

FIT Holding Co  vs.  MediaTek

FIT Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FIT Holding Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, FIT Holding showed solid returns over the last few months and may actually be approaching a breakup point.

MediaTek

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MediaTek are ranked lower than 14 (%) 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 FIT Holding and MediaTek

The main advantage of trading using opposite FIT Holding and MediaTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIT Holding 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 FIT Holding Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.