Correlation Between Asmedia Technology and MPI

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

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

Diversification Opportunities for Asmedia Technology and MPI

0.71

Correlation Coefficient

Asmedia Technology  MPI

Poor diversification

The 3 months correlation between Asmedia and MPI is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Asmedia Technology and MPI Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MPI Corporation and Asmedia Technology 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 Asmedia Technology are associated (or correlated) with MPI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MPI Corporation has no effect on the direction of Asmedia Technology i.e., Asmedia Technology and MPI go up and down completely randomly.

Pair Corralation between Asmedia Technology and MPI

Assuming the 90 days trading horizon Asmedia Technology is expected to generate 1.05 times more return on investment than MPI. However, Asmedia Technology is 1.05 times more volatile than MPI Corporation. It trades about 0.15 of its potential returns per unit of risk. MPI Corporation is currently generating about 0.07 per unit of risk. If you would invest  149,000  in Asmedia Technology on September 22, 2024 and sell it today you would earn a total of  51,000  from holding Asmedia Technology or generate 34.23% return on investment over 90 days.

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

Asmedia Technology  vs.  MPI Corp.

Asmedia Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asmedia Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Asmedia Technology showed solid returns over the last few months and may actually be approaching a breakup point.

MPI Corporation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MPI Corporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, MPI showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asmedia Technology and MPI

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

The idea behind Asmedia Technology and MPI Corporation 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.