Correlation Between GigaMedia and Century Aluminum

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

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

Diversification Opportunities for GigaMedia and Century Aluminum

0.13

Correlation Coefficient

GigaMedia  Century Aluminum

Average diversification

The 3 months correlation between GigaMedia and Century is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum 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 Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of GigaMedia i.e., GigaMedia and Century Aluminum go up and down completely randomly.

Pair Corralation between GigaMedia and Century Aluminum

Assuming the 90 days trading horizon GigaMedia is expected to generate 4.27 times less return on investment than Century Aluminum. But when comparing it to its historical volatility, GigaMedia is 2.48 times less risky than Century Aluminum. It trades about 0.02 of its potential returns per unit of risk. Century Aluminum is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,768  in Century Aluminum on December 24, 2024 and sell it today you would earn a total of  66.00  from holding Century Aluminum or generate 3.73% return on investment over 90 days.

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

GigaMedia  vs.  Century Aluminum

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.

Century Aluminum

Risk-Adjusted Performance

Insignificant

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

Pair Trading with GigaMedia and Century Aluminum

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

The idea behind GigaMedia and Century Aluminum 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.