Correlation Between Controladora Vuela and GigaMedia

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

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

Diversification Opportunities for Controladora Vuela and GigaMedia

0.86

Correlation Coefficient

Controladora Vuela  GigaMedia

Very poor diversification

The 3 months correlation between Controladora and GigaMedia is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Controladora Vuela Compaa and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Controladora Vuela 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 Controladora Vuela Compaa are associated (or correlated) with GigaMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigaMedia has no effect on the direction of Controladora Vuela i.e., Controladora Vuela and GigaMedia go up and down completely randomly.

Pair Corralation between Controladora Vuela and GigaMedia

Assuming the 90 days trading horizon Controladora Vuela Compaa is expected to under-perform the GigaMedia. But the stock apears to be less risky and, when comparing its historical volatility, Controladora Vuela Compaa is 1.21 times less risky than GigaMedia. The stock trades about -0.45 of its potential returns per unit of risk. The GigaMedia is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  133.00  in GigaMedia on October 9, 2024 and sell it today you would earn a total of  7.00  from holding GigaMedia or generate 5.26% return on investment over 90 days.

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

Controladora Vuela Compaa  vs.  GigaMedia

Controladora Vuela Compaa

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Controladora Vuela Compaa are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Controladora Vuela reported solid returns over the last few months and may actually be approaching a breakup point.

GigaMedia

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Controladora Vuela and GigaMedia

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

The idea behind Controladora Vuela Compaa and GigaMedia 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.