Correlation Between Holiday Entertainment and MediaTek

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

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

Diversification Opportunities for Holiday Entertainment and MediaTek

-0.21

Correlation Coefficient

Holiday Entertainment  MediaTek

Very good diversification

The 3 months correlation between Holiday and MediaTek is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Holiday Entertainment Co and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek and Holiday Entertainment 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 Holiday Entertainment 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 Holiday Entertainment i.e., Holiday Entertainment and MediaTek go up and down completely randomly.

Pair Corralation between Holiday Entertainment and MediaTek

Assuming the 90 days trading horizon Holiday Entertainment Co is expected to under-perform the MediaTek. But the stock apears to be less risky and, when comparing its historical volatility, Holiday Entertainment Co is 4.79 times less risky than MediaTek. The stock trades about -0.06 of its potential returns per unit of risk. The MediaTek is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  111,000  in MediaTek on September 5, 2024 and sell it today you would earn a total of  20,500  from holding MediaTek or generate 18.47% return on investment over 90 days.

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

Holiday Entertainment Co  vs.  MediaTek

Holiday Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holiday Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Holiday Entertainment 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

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MediaTek are ranked lower than 10 (%) 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 Holiday Entertainment and MediaTek

The main advantage of trading using opposite Holiday Entertainment and MediaTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holiday Entertainment 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 Holiday Entertainment 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.