Correlation Between Shanghai Commercial and MediaTek

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

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

Diversification Opportunities for Shanghai Commercial and MediaTek

0.9

Correlation Coefficient

Shanghai Commercial  MediaTek

Almost no diversification

The 3 months correlation between Shanghai and MediaTek is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Commercial Savings and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek and Shanghai Commercial 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 Shanghai Commercial Savings 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 Shanghai Commercial i.e., Shanghai Commercial and MediaTek go up and down completely randomly.

Pair Corralation between Shanghai Commercial and MediaTek

Assuming the 90 days trading horizon Shanghai Commercial Savings is expected to under-perform the MediaTek. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Commercial Savings is 1.97 times less risky than MediaTek. The stock trades about 0.0 of its potential returns per unit of risk. The MediaTek is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  76,400  in MediaTek on December 2, 2024 and sell it today you would earn a total of  75,100  from holding MediaTek or generate 98.3% return on investment over 90 days.

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

Shanghai Commercial Savings  vs.  MediaTek

Shanghai Commercial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Commercial Savings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shanghai Commercial showed solid returns over the last few months and may actually be approaching a breakup point.

MediaTek

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MediaTek are ranked lower than 11 (%) 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 Shanghai Commercial and MediaTek

The main advantage of trading using opposite Shanghai Commercial and MediaTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Commercial 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 Shanghai Commercial Savings 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.