Correlation Between GigaMedia and Hoist Finance

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

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

Diversification Opportunities for GigaMedia and Hoist Finance

0.69

Correlation Coefficient

GigaMedia  Hoist Finance

Poor diversification

The 3 months correlation between GigaMedia and Hoist is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Hoist Finance AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoist Finance AB 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 Hoist Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoist Finance AB has no effect on the direction of GigaMedia i.e., GigaMedia and Hoist Finance go up and down completely randomly.

Pair Corralation between GigaMedia and Hoist Finance

Assuming the 90 days trading horizon GigaMedia is expected to generate 10.06 times less return on investment than Hoist Finance. But when comparing it to its historical volatility, GigaMedia is 2.11 times less risky than Hoist Finance. It trades about 0.02 of its potential returns per unit of risk. Hoist Finance AB is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  329.00  in Hoist Finance AB on September 28, 2024 and sell it today you would earn a total of  455.00  from holding Hoist Finance AB or generate 138.3% return on investment over 90 days.

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

GigaMedia  vs.  Hoist Finance AB

GigaMedia

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 11 (%) 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.

Hoist Finance AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hoist Finance AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hoist Finance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GigaMedia and Hoist Finance

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

The idea behind GigaMedia and Hoist Finance AB 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.