Correlation Between GigaMedia and Kaufman Broad

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

By analyzing existing cross correlation between GigaMedia and Kaufman Broad SA, you can compare the effects of market volatilities on GigaMedia and Kaufman Broad 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 Kaufman Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and Kaufman Broad.

Diversification Opportunities for GigaMedia and Kaufman Broad

-0.5

Correlation Coefficient

GigaMedia  Kaufman Broad

Very good diversification

The 3 months correlation between GigaMedia and Kaufman is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Kaufman Broad SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaufman Broad SA 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 Kaufman Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaufman Broad SA has no effect on the direction of GigaMedia i.e., GigaMedia and Kaufman Broad go up and down completely randomly.

Pair Corralation between GigaMedia and Kaufman Broad

Assuming the 90 days trading horizon GigaMedia is expected to generate 2.14 times more return on investment than Kaufman Broad. However, GigaMedia is 2.14 times more volatile than Kaufman Broad SA. It trades about 0.26 of its potential returns per unit of risk. Kaufman Broad SA is currently generating about 0.13 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

GigaMedia  vs.  Kaufman Broad SA

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.

Kaufman Broad SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaufman Broad SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with GigaMedia and Kaufman Broad

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

The idea behind GigaMedia and Kaufman Broad SA 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.