Correlation Between Pegatron Corp and MediaTek

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

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

Diversification Opportunities for Pegatron Corp and MediaTek

0.2

Correlation Coefficient

Pegatron Corp  MediaTek

Modest diversification

The 3 months correlation between Pegatron and MediaTek is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Pegatron Corp and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek and Pegatron Corp 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 Pegatron Corp 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 Pegatron Corp i.e., Pegatron Corp and MediaTek go up and down completely randomly.

Pair Corralation between Pegatron Corp and MediaTek

Assuming the 90 days trading horizon Pegatron Corp is expected to generate 6.03 times less return on investment than MediaTek. But when comparing it to its historical volatility, Pegatron Corp is 1.39 times less risky than MediaTek. It trades about 0.03 of its potential returns per unit of risk. MediaTek is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  131,500  in MediaTek on December 3, 2024 and sell it today you would earn a total of  15,500  from holding MediaTek or generate 11.79% return on investment over 90 days.

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

Pegatron Corp  vs.  MediaTek

Pegatron Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pegatron Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Pegatron Corp 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

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MediaTek are ranked lower than 8 (%) 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 Pegatron Corp and MediaTek

The main advantage of trading using opposite Pegatron Corp and MediaTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pegatron Corp 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 Pegatron Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.