Correlation Between Tigerair Taiwan and MediaTek

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

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

Diversification Opportunities for Tigerair Taiwan and MediaTek

0.47

Correlation Coefficient

Tigerair Taiwan  MediaTek

Very weak diversification

The 3 months correlation between Tigerair and MediaTek is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Tigerair Taiwan Co and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek and Tigerair Taiwan 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 Tigerair Taiwan 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 Tigerair Taiwan i.e., Tigerair Taiwan and MediaTek go up and down completely randomly.

Pair Corralation between Tigerair Taiwan and MediaTek

Assuming the 90 days trading horizon Tigerair Taiwan Co is expected to generate 1.25 times more return on investment than MediaTek. However, Tigerair Taiwan is 1.25 times more volatile than MediaTek. It trades about 0.16 of its potential returns per unit of risk. MediaTek is currently generating about 0.06 per unit of risk. If you would invest  7,650  in Tigerair Taiwan Co on December 24, 2024 and sell it today you would earn a total of  1,810  from holding Tigerair Taiwan Co or generate 23.66% return on investment over 90 days.

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

Tigerair Taiwan Co  vs.  MediaTek

Tigerair Taiwan

Risk-Adjusted Performance

Good

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

MediaTek

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MediaTek are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, MediaTek may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tigerair Taiwan and MediaTek

The main advantage of trading using opposite Tigerair Taiwan and MediaTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tigerair Taiwan 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 Tigerair Taiwan 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.