Correlation Between China DatangRenewable and GigaMedia

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

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

Diversification Opportunities for China DatangRenewable and GigaMedia

0.75

Correlation Coefficient

China DatangRenewable  GigaMedia

Poor diversification

The 3 months correlation between China and GigaMedia is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding China Datang and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and China DatangRenewable 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 China Datang 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 China DatangRenewable i.e., China DatangRenewable and GigaMedia go up and down completely randomly.

Pair Corralation between China DatangRenewable and GigaMedia

Assuming the 90 days horizon China DatangRenewable is expected to generate 2.52 times less return on investment than GigaMedia. In addition to that, China DatangRenewable is 2.02 times more volatile than GigaMedia. It trades about 0.04 of its total potential returns per unit of risk. GigaMedia is currently generating about 0.19 per unit of volatility. If you would invest  117.00  in GigaMedia on October 5, 2024 and sell it today you would earn a total of  23.00  from holding GigaMedia or generate 19.66% return on investment over 90 days.

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

China Datang  vs.  GigaMedia

China DatangRenewable

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days China Datang has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, China DatangRenewable may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GigaMedia

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days GigaMedia has generated negative risk-adjusted returns adding no value to investors with long positions. 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 China DatangRenewable and GigaMedia

The main advantage of trading using opposite China DatangRenewable and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China DatangRenewable 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 China Datang 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.