Correlation Between MediaTek and Leatec Fine

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

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

Diversification Opportunities for MediaTek and Leatec Fine

0.62

Correlation Coefficient

MediaTek  Leatec Fine

Poor diversification

The 3 months correlation between MediaTek and Leatec is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding MediaTek and Leatec Fine Ceramics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leatec Fine Ceramics and MediaTek 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 MediaTek are associated (or correlated) with Leatec Fine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leatec Fine Ceramics has no effect on the direction of MediaTek i.e., MediaTek and Leatec Fine go up and down completely randomly.

Pair Corralation between MediaTek and Leatec Fine

Assuming the 90 days trading horizon MediaTek is expected to generate 0.69 times more return on investment than Leatec Fine. However, MediaTek is 1.45 times less risky than Leatec Fine. It trades about 0.15 of its potential returns per unit of risk. Leatec Fine Ceramics is currently generating about 0.05 per unit of risk. If you would invest  112,500  in MediaTek on September 13, 2024 and sell it today you would earn a total of  22,500  from holding MediaTek or generate 20.0% return on investment over 90 days.

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

MediaTek  vs.  Leatec Fine Ceramics

MediaTek

Risk-Adjusted Performance

11 of 100

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.

Leatec Fine Ceramics

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with MediaTek and Leatec Fine

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

The idea behind MediaTek and Leatec Fine Ceramics 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.