Correlation Between GigaMedia and Beazley PLC

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

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

Diversification Opportunities for GigaMedia and Beazley PLC

0.33

Correlation Coefficient

GigaMedia  Beazley PLC

Weak diversification

The 3 months correlation between GigaMedia and Beazley is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Beazley PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beazley PLC and GigaMedia 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 GigaMedia are associated (or correlated) with Beazley PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beazley PLC has no effect on the direction of GigaMedia i.e., GigaMedia and Beazley PLC go up and down completely randomly.

Pair Corralation between GigaMedia and Beazley PLC

Assuming the 90 days trading horizon GigaMedia is expected to generate 1.22 times more return on investment than Beazley PLC. However, GigaMedia is 1.22 times more volatile than Beazley PLC. It trades about 0.27 of its potential returns per unit of risk. Beazley PLC is currently generating about -0.01 per unit of risk. If you would invest  134.00  in GigaMedia on October 12, 2024 and sell it today you would earn a total of  20.00  from holding GigaMedia or generate 14.93% return on investment over 90 days.

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

GigaMedia  vs.  Beazley PLC

GigaMedia

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 16 (%) 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.

Beazley PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beazley PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Beazley PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GigaMedia and Beazley PLC

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

The idea behind GigaMedia and Beazley PLC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.