Correlation Between Fuji Media and GigaMedia

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

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

Diversification Opportunities for Fuji Media and GigaMedia

-0.67

Correlation Coefficient

Fuji Media  GigaMedia

Excellent diversification

The 3 months correlation between Fuji and GigaMedia is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fuji Media Holdings and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia and Fuji Media 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 Fuji Media Holdings 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 Fuji Media i.e., Fuji Media and GigaMedia go up and down completely randomly.

Pair Corralation between Fuji Media and GigaMedia

Assuming the 90 days trading horizon Fuji Media Holdings is expected to generate 1.96 times more return on investment than GigaMedia. However, Fuji Media is 1.96 times more volatile than GigaMedia. It trades about 0.16 of its potential returns per unit of risk. GigaMedia is currently generating about 0.02 per unit of risk. If you would invest  1,050  in Fuji Media Holdings on December 24, 2024 and sell it today you would earn a total of  380.00  from holding Fuji Media Holdings or generate 36.19% return on investment over 90 days.

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

Fuji Media Holdings  vs.  GigaMedia

Fuji Media Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fuji Media Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Fuji Media exhibited solid returns over the last few months and may actually be approaching a breakup point.

GigaMedia

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GigaMedia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fuji Media and GigaMedia

The main advantage of trading using opposite Fuji Media and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fuji Media 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 Fuji Media Holdings 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 Anywhere module to track or share privately all of your investments from the convenience of any device.