Correlation Between GigaMedia and Live Nation

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

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

Diversification Opportunities for GigaMedia and Live Nation

-0.29

Correlation Coefficient

GigaMedia  Live Nation

Very good diversification

The 3 months correlation between GigaMedia and Live is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Live Nation Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Nation Entertainment 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 Live Nation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Nation Entertainment has no effect on the direction of GigaMedia i.e., GigaMedia and Live Nation go up and down completely randomly.

Pair Corralation between GigaMedia and Live Nation

Assuming the 90 days trading horizon GigaMedia is expected to generate 1.14 times more return on investment than Live Nation. However, GigaMedia is 1.14 times more volatile than Live Nation Entertainment. It trades about 0.08 of its potential returns per unit of risk. Live Nation Entertainment is currently generating about -0.04 per unit of risk. If you would invest  143.00  in GigaMedia on December 30, 2024 and sell it today you would earn a total of  14.00  from holding GigaMedia or generate 9.79% return on investment over 90 days.

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

GigaMedia  vs.  Live Nation Entertainment

GigaMedia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GigaMedia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Live Nation Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Live Nation Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Live Nation 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 Live Nation

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

The idea behind GigaMedia and Live Nation Entertainment 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.