Correlation Between Amazon and GigaMedia

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

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

Diversification Opportunities for Amazon and GigaMedia

0.07

Correlation Coefficient

Amazon  GigaMedia

Significant diversification

The 3 months correlation between Amazon and GigaMedia is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and GigaMedia go up and down completely randomly.

Pair Corralation between Amazon and GigaMedia

Assuming the 90 days trading horizon Amazon Inc is expected to under-perform the GigaMedia. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.21 times less risky than GigaMedia. The stock trades about -0.16 of its potential returns per unit of risk. The GigaMedia is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  143.00  in GigaMedia on December 29, 2024 and sell it today you would earn a total of  13.00  from holding GigaMedia or generate 9.09% return on investment over 90 days.

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

Amazon Inc  vs.  GigaMedia

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

GigaMedia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GigaMedia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Amazon and GigaMedia

The main advantage of trading using opposite Amazon and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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 Amazon Inc 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.