Correlation Between GigaMedia and Hitachi

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

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

Diversification Opportunities for GigaMedia and Hitachi

-0.15

Correlation Coefficient

GigaMedia  Hitachi

Good diversification

The 3 months correlation between GigaMedia and Hitachi is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and Hitachi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi 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 Hitachi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi has no effect on the direction of GigaMedia i.e., GigaMedia and Hitachi go up and down completely randomly.

Pair Corralation between GigaMedia and Hitachi

Assuming the 90 days trading horizon GigaMedia is expected to generate 0.98 times more return on investment than Hitachi. However, GigaMedia is 1.02 times less risky than Hitachi. It trades about 0.14 of its potential returns per unit of risk. Hitachi is currently generating about 0.01 per unit of risk. If you would invest  122.00  in GigaMedia on October 27, 2024 and sell it today you would earn a total of  24.00  from holding GigaMedia or generate 19.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

GigaMedia  vs.  Hitachi

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 fragile basic indicators, GigaMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hitachi

Risk-Adjusted Performance

0 of 100

Weak

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

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

The idea behind GigaMedia and Hitachi 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.